In this article we will examine the demand for London property from two points of view, one from recent statics from PWC and the other a more local source, feedback from the seminar we held last week. Both show the thirst for property ownership is strong, and likely to grow even further into the future. Therefore, if you’re still sitting on the fence you might want to get off before it really is too late and London property as an investment becomes completely unattainable.
The Sow & Reap seminar last Thursday in Wembley was well attended with attendees from as far as Preston. The question and answer session which lasted for well over an hour showed the appetite amongst the crowd was serious. This was not a docile crowd, questions ranged from the impact of the Chinese demand dampening for London property to several questions surrounding the tax implications due to come in from 2017. The crowd ranged from your very novice investors to those who are very savvy and have been in the game for over 30 years.
One very enthusiastic lady entered the venue nice and early. I happened to be passing by the entrance and she asked me where the seminar was and I pointed the way, and told her there would be a charge of £50 for attending, which she was even happy to pay! Although this was just in jest, as there was no fee to attend the seminar.
One poor client who although had been reading our articles for five years, had prior to this event decided to take the plunge and invest in Spain, presumably after having been marketed to very cleverly. Over time his investment declined, to 25% of its original value. He had a chance to offload prior to it dropping to this level, however he didn’t as he couldn’t bear to face the loss and so held on until the loss became even larger.
He no doubt has seen the errors many people have made first hand. London properties did not drop 75% even during the worst crisis in recent history, in 2007-2008 the property prices reverted to what they were a couple of years before this time and that too for a very short period. Before they resumed their march onwards and upwards.
He is now committed to looking to invest in London property through ourselves, and has now become reformed. Through our regular missionary and preaching effort we work tirelessly so people avoid these traps of thinking the grass is greener elsewhere, it is not. The gold is here at your fingertips, you’re lucky to live in London and have direct access to invest in such a strong, fluid and vibrant property market. The rest of the world wants a piece of this pie and yet there are those who think there is a better option to be had elsewhere. It’s simply a myth.
The seminar was basically in two parts, one explaining why London is the place to invest and the other showing how we can help to add value. Both in terms of our ability to get deal flow and through our network to enhance planning and ability to reduce risk in a transaction.
A recent report from PWC show patterns of home ownership in London are changing fundamentally. In 2000, almost 60% of Londoners owned the home they lived in (either outright or with a mortgage), with around 40% renting from either private landlords or the social sector. New analysis from them shows that by 2025 this could be reversed, with only around 40% owning their home, and around 60% renting, mostly from private landlords.
Previous research highlighted the rise of private renting across the UK, particularly amongst 20-39 year olds (‘generation rent’), and predicted its continuation throughout the next decade.
There is a fundamental lack of supply which is not likely to be satiated. And will actually increase over time. It is expected the number of households will increase by 525,790 by 2021 yet the supply for new homes is expected to be at only 277,240. This is compounded in Central London boroughs where due to supply constraints the supply will be less than half of the demand.
The reasons why this is occurring is the city’s population is rising and fast. In February 2015 it surpassed its previous peak of 8.6 million, which it last reached in 1939.
Affordable homes are dropping, inevitably the result is spiralling home prices. After a rise of 5.4 percent in January 2016 alone, the average home price for the city is now £643,843. The current median annual salary in London now stands at roughly £34,000. This mismatch makes buying a home impossible for most people, since a mortgage will only give you five times your salary which equates to £170,000.
It’s no wonder that renters are now surpassing homeowners. Many of the latter group would themselves never have been able to purchase their homes if they’d started as first-time buyers at today’s prices.
The above paints a picture of the London market which is fast becoming an unattainable investment. Properties in other parts of London rise but not to the level the West End does.
We currently have secured three studios in prime parts of London in the region of £500,000. The deposits for these can be put in the deal either by way of cash or by way of refinance of an existing property.
These are studios in prime locations, one in High Street Kensington and the other in Lancaster Gate, the third deal is on the verge of being finalised.
The rental that can be achieved for the above is strong, the actual occupancy rate of a studio in Central London is 98.6%, the 1.4% time its empty is when there is work being carried out. They rent fast - usually in hours. I met the man who had commissioned this research, he owns over 1000 studios, that’s all he focuses on and with good reason.
The increase in rental demand means the demand for occupancy will grow from strength to strength. This means the amount of rent charged will increase.
These deals have been sourced due to our presence in the local area for nearly 15 years. These are deals which could be sold many times over if they were to touch the open market. They are safe, I can’t imagine a studio in London can drop much in price and the rental is the most robust for any property in the UK.
If you are interested in these studios, then call our office now and grab them before they go!
