Much of the London property market has been trailing behind the rest of the UK in recent months, but it still remains a popular property investment option for many.
After many years of soaring house prices, the capital has experienced a major slowdown in recent times. While property values remain among the highest in the country, the pace of growth has tapered – and even fallen in some parts of the city – and transaction levels have slowed compared to in other locations.
In the year ahead, most experts predict that the London property market will continue in a similar vein, with slower rates of growth than elsewhere. However, the whole country’s housing market is anticipated to slow down after the frenzy of the past year, as the effects of the stamp duty holiday and pent-up demand due to Covid begin to wane.
House price rises will vary across capital
One housing forecast from Savills splits the city’s property market activity into different sections. In prime central London – where top-end properties fetch the highest prices – the firm expects 2022 to see strong house price rises of 8% over the coming year.
Prime outer London, though, will see a much more modest 4% increase over the next 12 months. Still, with values already sitting in the multi-million pound region for many of these homes, this increase is a significant amount of money.
In the mainstream London property market, Savills pens a prediction of just a 2% house price rise over the coming year. This is lower than the UK average of 3.5%, and markedly below the leading north-west, which could see average values increase by 4.5%.
The latest forecast from Zoopla mirrors the same prediction of a 2% rise in London over the coming year.
Is London property market building momentum?
Despite the downsides of the capital for property investors – including the high house prices and lower rental yields – it remains a hugely popular investment spot. As a major international city, it is the focus of constant regeneration and investment projects that ensure its continued economic importance.
Further to this, its top transport system is also being expanded, with the likes of Crossrail broadening the areas that property investors can target. London rent is also very high, so some investors will find this outweighs the costs at the outset. Average London rent in October 2021, according to Zoopla, was approximately £3,431 per month.
Craig Tonkin, head of sales at agents Bective, said: “While we’re now starting to see signs of the market cooling across some areas of the UK, London continues to build momentum.
“This has been driven by an influx of foreign interest at the top end of the market and we’re seeing larger family homes, in particular, go under offer at pace due to a severe shortage of supply.
“With growing demand for London homes, the capital looks set to enjoy a sustained level of house price growth throughout the remainder of the year and well into 2022.”
Five-year forecasts shows regions come out top
From a property investment point of view, the UK’s regions – particularly the north-west, Yorkshire and the Humber and the Midlands, according to much of the data – tend to offer the best options for returns. House prices are lower, allowing more space for stronger yields. These are also the areas predicted to see the strongest property price growth in the coming years, meaning strong capital gains prospects.
Rental demand is also high, and climbing, in many of the UK’s major cities. Manchester, Birmingham, Liverpool and Leeds are all areas that are often targeted by London leavers. They are also hugely popular among students, graduates and young professionals, with a lower cost of living combined with the appeal of the growing number of businesses relocating to these areas.
Many property investors who have had success in the London property market in the past may be tempted to continue to invest there. While there are certainly many up-and-coming locations that offer good buy-to-let opportunities in the capital, it seems a growing number of investors and landlords will be considering looking at areas further afield to make the most from their investments.
BuyAssociation has a range of property investment opportunities available across the UK, from London and surrounding areas to the booming north of England. Browse a selection of our opportunities here, or get in touch for more information.