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London Property Investments – A Safe Haven

January 27th, 2012

London Property Investment Market – Update

Here at Ventis Property, we have been noticing changes in attitude towards clients investing in London property as the expectations and ability to secure solid investments has become increasingly challenging.

Like the rest of the country, London has seen a decrease in the number of sales over the past several years as a result of the impact of the credit crisis and difficulties in securing mortgages, however we are witnessing values rising.

The number of home sales has fallen again across the country

 

Source: CML 

Lenders report that mortgage demand remains soft and unlikely to increase soon

Source: Bank of England Credit Conditions Survey 

Average house prices grew 6% in London in the last year, higher than other regions

 

Source: CLG

So how is this impacting investors?

In recent years the investment market has been highly focused on securing properties under value from anything up to 30% off comparable values. With interest rates remaining at an all-time low, the volumes of distressed opportunities has significantly decreased even though nationally the UK’s economic activity has remained stagnant.

London and the South East has remained a consistent performer in property as money from overseas and its diverse economy has kept values stable and in many areas we have seen an increase. The demographics and density of population has kept the rental market particularly buoyant and we are seeing a solid growth in yields.

A majority of surveyors in London expect house prices to rise in the next quarter

Source: RICS

As a result, investors are finding it increasingly difficult to secure deals in London at target prices achieved post 2008 as demand has significantly increased and supply stagnated. Where values have been on the decrease around the country, access to  below market value deals are available, however the appetite and concern of risk against further decreases has created a focus for investors towards the South East.

 

What’s on the outlook for investors?

Our view is that London and the South East is becoming somewhat of a ‘safe haven’ for investors and concerns around achieving 25% or 30% off comparable property is on the wane. Where our clients are able to achieve yields of over 6% or 7%, deals are being secured where discounts can be viewed between the 5% to 15% range.

Investors are viewing the significant potential for capital growth in the medium to long term as less of a risk than investing in alternative locations around the UK.

Author: Tahir Akram

Ventis Property Investment

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