An Englishman’s home is his castle, goes the old saying. Or it used to be – homeownership is becoming less and less affordable for many, as properties in London and the South East soar. Prime and central London are very popular, due to their great locations, accessibility, beautiful architecture, transport links and the cultural and entertainment attractions close by.
As a result, many would-be buyers are finding it difficult to purchase the stunning properties they’re after in the areas they want. This may go someway to explaining as to why the lettings market is experiencing significant interest in prime London, as well as the fact that regulations surrounding mortgage lending are kicking in; therefore for many borrowers it’s harder to get lending for the property they’re looking for due to the recently-introduced MMR (Mortgage Market Review) rules.
After all, house prices in London are predicted to rise by 25% in the next five years, as the shock Conservative victory back in May means that the threat of a mansion tax is no longer present, boosting confidence as domestic and international investors flood back to the market. Hence if it’s not possible to get a mortgage on the property they desire, many discerning buyers will bite the bullet and look to rent in their place of choice.
This is why it’s the perfect time to invest in prime London rental property. While London prime property was forecast to grow by 3-5% this year back in December, strong tenant demand was predicted to boost rental prices by 10% over the next year. With homeownership on the wane (the same thing is happening in the US – since the recession owning a property has become an unrealistic goal for many people); the rental market is likely to become a more realistic option for many – even for those with larger budgets, as they won’t necessarily want to compromise on area.
Properties for sale are also moving across to the lettings market, meaning that there will be more properties available for investors to put their money into. Very few traditional investments can compete with this market; the return on investment on bonds markets, increasing uncertainty and endlessly-changing policy when it comes to pensions; mean that property is becoming a sure-win.
London is also such a popular city, that it’s unlikely that housebuilding programmes and interest rate rises will drastically effect the market. There are always ups and downs, but over time property investments have, and will continue to, pay off.