A Comprehensive Look At Real Estate Investment State Of Affairs In London

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The leading UK market analysts expect the cost of housing in London will increase by more than 20% by 2020. The latest data of the Land Registry shows that the constantly increasing average cost of housing in London has crossed the threshold of half a million pounds, and currently stands at £514,097. The rise in prices in the city is estimated at the level of 12.4% compared to the previous year, which is significantly higher than the level of price increases in most other regions of the country; importantly, the price for the services of conveyancing solicitors has increased quite similarly – roughly by 10%.

The most expensive areas, of course, remain to be prestigious and well-known of Kensington, Chelsea and Westminster. However, the rise in prices in Kensington and Chelsea, according to recent data was estimated at just 3.6%, while prices in Westminster has increased by only 6.1% compared to last year – a positive, but a slight increase in comparison with other areas of London. The greatest increase in property value over the last year noted in the areas of Barking and Dagenham (15.3%), Hillington (15.2%) and Enfield (13.4%).

Thus, considering the prospect of buying real estate in London for the purpose of investment, prospective buyers should explore developing areas, which can often have a greater potential than the well-known districts of the capital. It is worth paying attention to the regeneration zone areas – Nine Elms, White City, King’s Cross, and many other places, where the value of property has not yet reached its maximum price. Ambitious projects to revive and transform these areas significantly raise the cost of housing in them, and makes them more attractive to buyers, and the presence of two stations will benefit suburbs Ealing and Acton.

The steady increase in property values can be associated with a number of different factors. Availability of mortgage lending continues to attract more and more new customers. Another fact that instils confidence when buying new homes is the parliamentary elections that took place in mid 2015, by the results of which it became clear that an addition to mansion tax on expensive real estate is not going to be imposed.

Growth in the future will also largely depend on the number of proposals of new homes on the market. In recent years, the rate of construction of new facilities significantly lagged behind the required amount of property, which the city must ensure the ever-increasing population. Territorial capital opportunities for the construction of new facilities are limited – in London simply do not have enough space for the rapid construction of new facilities in accordance with the growing demand, and a permit for the construction of new homes can take years, so significant changes in this area are not expected.

One of the most significant factors contributing to the increase in prices, as is the fact that the inhabitants of the so-called ‘family’ areas such as Clapham and Fulham, are less and less willing to move to other counties of England. A dynamically developing London’s economy, increasing the cost of the daily commute from the suburbs to and from work, and as a result, significantly increases desire to stay in London, leads to the fact that families with young children no longer want to move to the suburbs, as it was earlier.

A Brief Overview Of London Real Estate Market From Investment Standpoint

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To choose the right investment target, you should thoroughly examine real estate market, its main seasonal trends, the interconnection with political factors in the international arena, as well as consider recoupment of premises at a time when the resale is made. Real estate market in London is characterised by a low level of dependence on the price of international discord, persistent foundation of its recoupment which is provided by a stable economy and the continued growth of business.

Analysing the market of London real estate, almost 50% of investment project accounts for international investments. This suggests that the real estate market is an attractive area, and it is so for a good reason. When buying real estate investors from many countries are spared from paying tax on annual capital gain, which typically ranges from 25 – 55%. When purchasing residential property in London a resident has to pay 7.8% VAT, then process the second transaction, irrespective of the commercial value of the object, in the amount of 1,000 pounds. By investing money in real estate, investors from the CIS should remember that London authorities guarantee them a mortgage of up to 85% of the total value of the property. If we take the percentage increase, the annual increase in the cost of sales of real estate in London is capped at 14%. Thus, for example, in CIS countries it is practically superior to the most popular interest rate on deposits in the currency of the leading banks, as well as in the private real estate, rent profitability which in London is extremely high.

It is worth noting that the price factor is affected by both the country and city development, in which the target property is located. Of course, such factors as the district, development plans, proximity to downtown and other vital geographical points contribute to the price formation greatly. Real estate in London in respectable quarters is offered at high cost starting from around 2.5ml. pounds. The prestigious areas of London, as a rule, include Chelsea, Mayfair, Belgravia, Kensington, and Knightsbridge. The price per square meter of residential property in these areas of London varies between 10 to 18 thousand pounds, with particularly high prices in the central areas of the Thames.

Legal assistance

In order to properly invest the funds into real estate, you must have a thorough training, both in terms of information and legislation, and, of course, have links in London, which could contribute to the process of selling real estate. The most suitable for an investor package of conditions and opportunities. This is where you will need the services of conveyance solicitors – legal specialists that deal with real estate in England. Larger firms dealing with property thoroughly examine market proposals, and provide you with a large number of opportunities – a wide array of services: from professional estimation, selection of property and legal services to furnishing and communications design.

The state of affairs on real estate market of England: London is booming

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From an economic point of view, investment in purchasing UK property is a beneficial direction, as it provides real yields about 10.3% annually. ‘The calculation is as follows: from the national UK house price index of the Nationwide Building Society, grew in June by 11.8% we subtract the consumer inflation rate, which is 1.5%’, EXNESS experts say. Therefore, the expert company does not believe that the UK property market has arisen as a ‘bubble’. In the coming months, the situation in this sector is likely to get stabilised.

This upsurge is provoked by Indian, Arabic, Chinese and Russian investors, showing interest not only for luxury accommodation in this city, but also focused on the mid-price segment, Vadim Tkachenko, the Partner of vvCube companies and CEO of appraisal company Fair Value explains. British themselves do not particularly heat up real estate market. But there is a factor of economic instability, incomprehensible situation in global economy and developments in the euro area, which led many hedge risks in the British real estate as the main guarantee of stability.

The sharp rise in property prices in the UK is largely associated with the growth of credit and the general improvement of the situation on the world financial markets, says analyst MFX Broker Matthew Cornell. Unprecedentedly soft monetary policy of the Bank of England and the Federal Reserve have led to a reduction in key interest rates. The Bank of England has set its key interest rate at 0.5% and the Federal Reserve at 0-0.25% rate. Such a policy leads to an increase in the availability of cheap money, which is invested in stocks and real estate market. So the key rate on 10-year UK bonds, upon which the mortgage bank rate is calculated, declined from the level of 5.4% in 2007 to 2.55% in 2014.

Thus, the policy of cheap money in England and the United States has led to the emergence of the bubble in the property market in England. Most likely, as experts predicts, Bank of England in the nearest future will be forced to tighten monetary policy by raising interest rates, which will have a negative impact on the real estate market and real estate prices will cease a significant growth for a certain period of time. The recently introduced measures to tighten the foreigners buying real estate conditions in England would lead to a decrease in the activity of real estate purchases by investors from the USA, who now have access to really available, cheap loans. The estimations of the largest conveyance solicitors based on real statistics say there is no way the market is going to experience a decrease. According to various estimations, it is expected that the price in the capital will keep on increasing in price in the next 5 years and experience a possible increase by 15 – 35% (!) in the next decade.