23 Aug by Amy Jackson

London Property Market Forecast

How has London changed over Time?

The London buy to let market has faced some turbulent times in recent years, leading many to question the reliability of London property investment. Turn back time, however, and you’ll see that London was once praised for its property market, with the high demand and growing house prices London offered creating lots of opportunities for investment.

In this property investment guide to London, we’ll explore how London’s buy to let market has changed over time along with looking at the best area for property investment in London today, London property market forecast predictions, and whether you should look away from the capital when it comes to investing in the UK housing market.

 

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London Property Market

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The History of the London Property Market

The capital of England and a major tourist spot for visitors from around the world, London plays a huge part in not just the UK economy but the global economy too. London has long been a main point of interest when it comes to the UK housing market, attracting property investors from around the globe.

Back in the 1990s, savvy investors snapped up properties in some of the most coveted London locations, many of whom were unbeknown to how the average property price in London would grow. In a feature by the Guardian in 2016, interviews were published with a range of people who purchased London real estate back in the ’90s and saw their property values grow. In one case, a man purchased a central London apartment for £218,000 in 1996, which was valued at a whopping £1.5 million by the end of 2015. In another, a Victorian terraced house was bought for £80,000 in Oxford and was valued at at least £525,000 by late 2015.

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These kind of success stories are what attracted so many to London’s buy to let market. Fast forward ahead to 2007, during the time of the financial crisis, and a typical London property near King’s Cross station would be purchased for £200,000, and now worth over £300,000. Although not as impressive as the gains made on properties purchased in the ’90s, this figure shows that London’s housing market had continued to make some growth during this time.

Look at the last couple of years, however, and the figures show that London’s property boom is over. House price growth statistics are not what they used to be, with property prices having slowed in 2016 for the first time since 2008. As of 2019, interest in London’s property market has massively decreased due to London house prices falling

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Recent London Property Market News

When researching London property market news in 2019 and reading any property investment guide to London, you’ll be hit with statistic after statistic revealing the decline of property investment in the capital. Just six months or so into the year, during mid-2019, the average property price in London was reported to have fallen at the fastest rate in ten years. This annual drop in house prices is following a gradual slowdown seen over the last two years. Pair these negative growth rates with the disappointing average rental yields that come with London property, and the answer on many investors lips is – why invest in London property at all?

London is notoriously known as one of the priciest places in the world to buy a property. With average property prices of around £484,173, many investors are put off by the capital’s excessive costs, especially if they’re unlikely to see much return from both London house prices falling along with low yields. Rental yields in London stand at around 3.05 per cent on average, while negative rental price growth of 1.12 per cent shows how buy to let prospects are declining thanks to a rental costs price drop. Recent reports reveal that around 550,000 more people are leaving London than moving to it. Since buy to let relies on tenant demand in order to be successful, this increase in London leavers suggests that a lack of demand is the reason behind London’s declining rental price growth.

Many believe this slow in London property prices has been a result of Brexit uncertainty towards the UK housing market after the Brexit vote back in 2016. However, with figures revealing that many parts of the UK have received higher levels of interest after the Brexit vote than before it, this doesn’t seem to be the case.

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London Property Market Forecast

So we know that house prices in London are falling, but what does the London property market forecast suggest for the future? According to Savills, the average property price in London is expected to grow by just 7.1 per cent by 2022. While better than no growth at all, this is the lowest increase compared to predictions for the rest of the UK.

Then there are rental forecasts. A report by JLL suggests that the Greater London area is expected to see rental price growth of 10.9 per cent by 2022, with an increase of just 3 per cent in Prime Central London.

Certain postcodes in London do have positive forecasts for the future, which is why it’s so vital to research the best property investment areas London has to offer if you’re keen to include the capital in your UK property portfolio. Some parts of London such as Earls Court and Canary Wharf are predicted to see improved price rises and growth by 2022 thanks to the high number of regeneration projects in place.

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How do London Property Market Predictions compare to the Rest of the UK?

When analysing housing market predictions for the UK as a whole, things look a lot brighter in areas outside London. A London property market forecast for 2019 and beyond suggests that investors should look up North for the best rate of UK house prices. The north-west region boasts the most impressive growth, both now and in the future. By 2022, property values in the north-west region are predicted to grow by 18.1 per cent compared to London’s 7.1 per cent figure.

In the north-west region, home to two cities with some of the strongest emerging markets – Liverpool and Manchester, property investment is booming. High populations of students and young professionals have led to a demand for property and rental price increases of up to 5.76 per cent in Manchester. Many of those reportedly moving away from the capital are choosing to live and work in the north-west instead, with a record number of Londoners having moved to Manchester back in 2017. Predictions of 17.6 per cent rental growth are expected for Liverpool between 2018 to 2021, and an increase of 16.5 per cent in Manchester during the same period. These positive statistics come during an uncertain time while the UK waits for the aftermath once we leave the EU at the end of 2019, suggesting that the market will remain strong.

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The strength of this region’s housing market has led many to believe that the north-west will continue to excel even further over time, both in terms of capital growth and rental yields. Liverpool and Manchester boast some of the best rental yields in the country, with certain postcodes such as the L1 area presenting yields of up to 13.63 per cent. Figures like these beg the question – why invest in London property with its slow price rises and disappointing yields, when there are better opportunities elsewhere?

While London was once one of the UK’s most promising spots for investment, today’s figures and future predictions paint the capital in a much different light. Investors adamant to buy property in London today should do so with caution, researching the very best areas for rental demand, yields, and capital appreciation.

For more information on the UK buy to let market, take a look at our buy to let guide or check out our latest UK property opportunities.

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