MSR Property Investment Update – London

London has always been a fantastic real estate #investment opportunity for international and domestic investors. We saw unprecedented price growth in the capital between 2010 and 2016, with average #property prices increasing by a staggering 62% according to the UK House Price Index. Furthermore, buyers spent a record high £11.6 billion on #London properties over 2022, an increase of 45% year-on-year.

Headwinds investors face:

The Bank of England base rate is at its highest level for over 14 years. Analysts expect the base rate to peak at 4.5% in the summer, a stark increase from the 0.1% rate back in 2021. To put that into perspective an average two-year fixed #mortgage has increased from around 2.29% in November 2021 to 5.32% at the end of March 2023.

Why London:

London boasts one of the largest #financial sectors in the world, a vast population seeking job opportunities that can’t be found elsewhere, some of the most desirable neighbourhoods in the country, and a strong rental market (average yields 4.1%). Additionally there have been top transport system expansions (including Crossrail) that will help to increase property values further.

London asking prices fell from a peak of £695,642 in October 2022 to £667,587 in January this year but have rallied 2% in the months of February and March versus a 0.8% increase across the U.K as a whole during the same timeframe.

A key consideration when looking at this rally is supply and demand. Analysts have seen a 17% reduction in the number of sellers entering the London market, compared to February 2022. According to #rightmove the number of homes available to purchase in London is 14% lower than the same period in February 2019, prior to the pandemic. This supply shock has helped keep property prices stable, despite the increase in base rates.

Average property prices by Borough (March 2023):

The London borough of Camden has seen the largest year-on-year increase in average property prices (13.4%), with Barnet (6.8%), Islington (5.4%), Sutton (4.4%) and Newham (4.1%) going strong.
The only Boroughs in London to see a negative year on year change are Kensington and Chelsea (-1.8%) and Richmond Upon Thames (-0.7%).

The London rental market:

According to Rightmove, the number of enquiries for UK #rental homes is up 23% compared with this time last year. The most in demand property type are studio flats, and one-bedroom properties.

As of Q3 of 2022, average London rents had risen to £2,343pcm, representing the largest ever annual increase of 16.1%. Hounslow (5.8%), Barking and Dagenham (5.6%) and Bexley (5.5%) are currently the top London Boroughs for annual rental yield.

Analysts predict that London rental values will continue to experience growth in the coming years, with forecasts sitting at around 5% continued annual growth until 2025.

#mortgage #property #realestateinvestment #estateagents #conveyancing #investing #investments

*This article is not legal advice but provides a general overview. The specific details of your case will determine the best course of action.