
London’s property market may be losing steam at the moment, but the surrounding South East region is forecast to deliver a very different performance in the coming months. Homebuyers and property investors alike are being pushed out of the capital by high prices, and while some instead look to the major regional cities others are choosing to simply settle in the surrounding areas.
Higher transaction costs, such as the recent increase in stamp duty, are also putting buy-to-let investors off of pricey London properties. Meanwhile, international investors in key markets such as China, the Middle East, and Russia are tightening their belts in the face of tougher economic climates, making them less inclined to pay the high values of properties in the UK capital when they could pay a lot less by simply moving outside the city and into the surrounding South East region.
The Centre for Economics and Business Research (CEBR) is predicting that this will lead to a significant shift of demand away from London and into the South East over the remainder of this year. It expects that the capital will experience growth in house prices averaging 5.8% across the whole of 2016. The South East, meanwhile, will see average growth of 8.3% in property values if CEBR’s predictions prove accurate.
High prices have plagued both owner-buyers and property investors in London lately, and investors have been further put off by comparatively mediocre yields. According to the Office for National Statistics (ONS), January this year saw London properties achieve a 10.8% annual increase and hit an average value of £531,000. This is compared to a UK average property price during the same month of just £292,000, which followed a somewhat more modest annual increase of 7.9%.
These high prices are leading those who work in the capital to look for homes not in the city but in commuter towns. This is true of both buyers and renters. Some are able to afford a property in a location outside London that will allow them to commute into the city when they could not afford to buy within the capital itself. Others look for properties to rent in commuter locations because rents are similarly lower, allowing them to better save up a deposit for a future property purchase or simply leaving them better off each month even after additional travel costs are accounted for. This shift in both buying and renting demand is also serving to help make commuter towns across the South East into better prospects for investors, who will also benefit from increased accessibility as a result of lower prices.
London still has some advantages for those who are willing and able to afford the higher purchase prices, however internationally; it has a definite reputation as a safe haven. As such, there is continued, solid demand from investors who are willing to accept higher prices and lower yields in return for the comparative safety of investing in the capital.
Author Bio
Hopwood House are property investment specialists with a large range of UK developments including property investment in Manchester, Liverpool and London.
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Daniel Peacock