The latest on the London property market: house prices and investment

The London property market remains a hugely popular place to invest, particularly among international buyers. It has ridden the storm of the past few months, and the city continues to be a key investment location.

The UK’s capital has long since been known as a “safe haven” when it comes to property investment. The city’s strong economy, thriving business outlook and prospering jobs market are among the reasons people choose to buy, live and work there.

Over the past six months, the London property market has continued to attract investment. It is especially well-trodden among buyers from overseas as a key “go-to” location in the UK. According to recent reports, investors from Hong Kong in particular are currently more keen than ever to buy there.

One report from Bloomberg points out that several high-end estate agencies have seen a spike in enquiries. Chestertons has experienced an 80% increase in new client registrations from Hong Kong so far this year. Meanwhile, Black Brick Property Solutions and Beauchamp Estates have around 20% more clients on their books.

According to Camilla Dell of Black Brick, more Hong Kongers are now also looking to invest in homes where they can “permanently relocate to the UK”.

“There will be potential for more buyers as a result of BNO holders being told they’re welcome with open arms,” she adds.

House prices: too early to tell?

The London property market has soared over recent decades. Despite a slight plateau caused in part by some political uncertainty and Brexit, the sector has remained strong. Pre-lockdown, a property in the capital cost an average of ￡601,562, according to HM Land Registry data from March 2020. This ranged from the average cost of a flat sitting at ￡429,401, up to an average detached house coming in at ￡889, 308.

Since March, a lack of transaction data has made it difficult to accurately sum up house price changes. However, activity began to pick back up significantly back in June. And Rishi Sunak’s announcement of a stamp duty holiday for properties up to ￡500,000 has cemented this bounceback. Many experts expect this will buoy up house prices for the time being.

The latest data available from HM Land Registry shows figures from May 2020. This showed that average property prices in the UK increased by 2.9% from May 2019, up to ￡251,973. The London property market saw an even bigger rise of 3.3% in the year to May 2020. This upward trajectory shows a promising start for the capital, although the short-term outlook is uncertain.

Tax changes affecting London buyers

In the capital, while many homes are priced above the new half a million threshold, the tax cut still means huge savings for buyers and investors. This is spurring on a wave of transactions as people try to secure deals before stamp duty reverts to previous levels next March.

For foreign buyers, there is a further incentive to act quickly. As of March next year, those living overseas who wish to invest in UK property will need to pay an additional 2% stamp duty surcharge. Since this announcement, the London property market had already seen an influx of enquiries from abroad.

What’s happening with rents?

The London rental sector is another highlight for property investors in the capital. As a city filled with young professionals, it has one of the strongest rental industries in the country. While it may not be the most high-yielding area, it is a location where investors and buy-to-let landlords should always see extremely high demand from tenants, meaning minimal void periods and a consistent rental income.

The latest data from the Office for National Statistics (ONS) shows that the average pre-lockdown rent in London in March was ￡1,425 per month. This is more than double England’s ￡700 per month average.

Between July 2019 and July 2020, average private rents increased by 1.1%, says the ONS. While this is slightly lower than the 1.6% average across England, the level of growth still indicates a strong market for rental income.

This article was written by Eleanor Harvey and is used with permission.