Price increases of London property from 1995-2015

 

A recent study by leading UK estate agent Chestertons, in collaboration with the Berkeley Group, has suggested that buying a property in the Capital will almost guarantee long-term financial gains provided that the property is held for a minimum of 5 years. Why 5 years? Because investors have to account for the cyclical upswings, downswings, and then upswings again for a better likelihood of accruing capital gain.

As Ian Plumley is Senior Vice-President at luxury house builder Berkeley Group, a FTSE 100 company, mentions in a recent interview, "London property is historically a resilient investment in the long term and the reasons for this are highly unlikely to change in the foreseeable future. The attractions of this market go far beyond short term economic performance and political debate."

To put it in the simplest terms, London has always been a safe investment bet.  For example, in the case of London Flats, investors who have managed to hold on to their properties have typically seen their investments increase its values by an average 165% every 5 years from a high of over 220% in the year 2000.

 
 

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Taking advantage of this persistent trend

This trend is a known fact among observers: a 2014 briefing paper published by the House of Commons Library has estimated about 32% of prime London buyers in 2013-2014 were international buyers, and another report from the Mayor of London says that between 2014-2016, up to 19% of all new homes brought into the London market were purchased by foreign investors; 61% of which were from Singapore, Malaysia, Hong Kong, and China. This has made for some interesting ways those investors have chosen to “sit” on their investments until they are ready to offload into the market again.

Mr Plumley explains, “While many investors purchase property purely for capital growth or to generate a rental yield, Berkeley Group has found that many of its overseas buyers are either occupying their properties themselves or are putting their children in them while they study in the UK. This gives parents the added security that their children will be in safe accommodation whilst also providing somewhere for them to stay when they visit London. “

Purchasing homes for students in the UK

The UK is the second most popular destination in the world for overseas students amounting to over 19% in school year 2016/2017. These assertions are underscored in some, more than most; like at the Imperial College London that has a 55% international student population, Kingston University (36%), The Royal College of Art (20%), and the University of Greenwich (23%).

If we take into account the most optimum conditions, purchasing properties near some of these locations, instead of renting for students, can typically save up to 55% off the annual rent by paying off a mortgage instead*.  

For a smart consumer with a view of the longer term financial gain, renting a property in the UK should be out of the question. As the London property market continues to evolve with the growing complexity of needs and wants of investors, residential developers like the Berkeley Group will be developing products aimed at satisfying those sophisticated buyers like its London University Collection, which boasts of exclusive luxury homes next to some of London’s finest universities.

 

For interested parties, please contact newhomes@chestertons.com for a free discussion about the purchase and mortgage processes in the UK.

*Contact newhomes@chestertons.com for a free discussion about purchase and mortgage processes.

 

Sources:

*Nationwide House Price Index Data - https://www.nationwide.co.uk/about/house-price-index/download-data#xtab:regional-quarterly-series---by-property-age-group-data-available-from-1991-onwards

*Foreign investors snapping up London homes suitable for first-time buyers - https://www.theguardian.com/society/2017/jun/13/foreign-investors-snapping-up-london-homes-suitable-for-first-time-buyers

*Why it makes more sense to buy rather than rent in the UK - https://www.chestertons-news.com/blog/2018/6/26/why-it-makes-more-sense-to-buy-rather-than-rent-in-the-uk