London Property Market Strengthens Further

The average price of a UK home increased by around 1.3 per cent in August, the biggest monthly rise in two and a half years, led by gains in London, according to the latest figures released by Nationwide.

Property prices are being driven upwards by a high level of property investment activity as investors seek to take advantage of high rental demand, particularly in the capital.

With many would-be first time buyers struggling to raise the necessary finance required to buy a property, a high number of people are being forced to rent property instead, pushing rental values higher in the process; an attractive proposition for shrewd investors looking to cash-in.

Steve Hicks, managing director of Genie, says that the biggest problem for first-time buyers is the need to save for a deposit on a mortgage, which is currently almost unachievable for many who are struggling with their day-to-day needs. Yet, the increase in average house prices will make it harder still.

"It is already incredibly difficult for people to get on that first rung of the housing ladder so news that average house prices are on the increase means that it will be even harder, said Mr Hicks. "Still the fact remains that the average deposit for a first time buyer in the UK currently stands at £26,000 up from £12,000 five years earlier, an increase of 117 per cent."

Investor demand for homes in London is being significantly boosted by international homebuyers, many of which are benefitting from a favourable exchange rate.

Estate agents Cluttons report that compared to the price peak in the third quarter of 2007, home buyers from the Far East are now benefitting from price discounts of as much as 60 per cent and home buyers from the Middle East as much as 30 per cent, as a result of the weakened sterling currency. With no immediate appreciation in the value of sterling anticipated any time soon, this advantage looks set to continue for the foreseeable future.

Sue Foxley, head of research at Cluttons, said: "International buyers have long bolstered demand for property in the capital, pushing up prices as the supply shortage continues."

Cash buyers, both domestic and foreign, are still very much in evidence in popular London markets, such as St Johns Wood, due to the fact that demand for property to rent in St John's Wood is far outstripping supply, pushing rents higher in the process.

Aside from good rental returns, the lack of houses and flats to rent in St John's Wood is also contributing to higher property prices, as competition between investor landlords intensifies in a bid to plug the rental housing shortage in the area.

 

Adam Feather, managing director of local estate agents Robert Anthony, said: "The continuing imbalance in demand and supply has created a competitive market in St John's Wood where many properties receive multiple offers and subsequently prices are pushed up."

Of course, it is not just St John's Wood that is attracting enormous investor demand.

High demand for rental homes in surrounding areas from people looking for a flat or house to rent in Regents Park, Primrose Hill, Baker Street, Swiss Cottage and Finchley Road, among other highly desirable local areas, is also proving alluring for investors. But with supply highly restricted, competition among homebuyers is fierce.
 

 

"Clearly, both owner-occupiers and investors are unwilling to part with what may well be the only asset they hold that is actually increasing in value," said Andrew Ellinas of leading estate agents Sandfords.

Until there is a notable rise in the supply of homes coming onto the sales and rental markets, property values will almost certainly continue to increase further, making it even harder for first-time buyers to gain a foot on the housing ladder.

Prime Central London Property Prices Continue to Rise

London's 'safe haven' status is continuing to attract a higher number of homebuyers from across the world, which is placing greater pressure on the city's acute housing supply crisis, pushing property prices higher in the process.

The situation is most acute in the heart of the capital, with the average price of a home in central London now 13 per cent above the previous market peak in early 2008, according to Knight Frank. This reflects high buyer demand coupled with a severe shortage of property for sale in Marylebone, Mayfair, Kensington and Fitzrovia, amongst other sought-after areas.

"London still remains a key destination for investors looking for 'safe-haven' assets, a fact reflected in the continued rise in interest from prospective buyers, up 23% in the three months to July compared to the previous quarter," said Liam Bailey of Knight Frank.

Increasing the supply of new build properties is central to dealing with some of the major problems facing the housing system; government has a critical role to play in enabling home builders to meet the country's housing need, particularly in central London.

For example, any house hunter searching for a house for sale in Mayfair or a flat for sale in Fitzrovia will find that there is very little stock on the market and this is underpinning prices in central London.

Jennet Siebrits, Head of Residential Research at CBRE, said: "London is still a bright spot in the UK residential market with a lack of supply and strong interest from international buyers looking for a safe haven for their money underpinning house prices."

A recent report compiled by property consultants CBRE shows that over the last decade London's population has grown by 850,000 whilst only 197,000 new homes have been constructed in London over the same period.

Reflecting on the growing supply-demand imbalance in the capital. Andrew Ellinas, Director of leading central London estate agents Sandfords, said: "The property market in central London is continuing to motor away from the rest of the UK."

The rise in property prices is also rippling out to leading secondary locations, such as St John's Wood. 

Located a short walk from Baker Street, St Johns Wood is considered to be one of the most popular neighbourhoods to live in London. It generally attracts a high level of demand from homebuyers - reflected by the lack of houses and flats for sale in St Johns Wood - making it one of the most expensive places to buy property in the UK.

It does not take a property expert to realise that prices in the capital are likely to rise unless more new homes are built in the foreseeable future.

The latest Housing Market Sentiment Survey from Zoopla.co.uk reveals that 63 per cent of homeowners expect house prices to rise between now and the end of 2012. This time last year, only 57% of homeowners expected an increase in property prices in the second half of the year.

"Homeowners evidently feel that there are some grounds for optimism, despite the backdrop of slow economic growth and tight mortgage lending," said Nigel Lewis of Zoopla.co.uk.

The Prices of Houses and Flats for Sale in Fitzrovia Soar

The residential property market in prime central London remains strong, with prices having appreciated significantly across many parts of the region so far this year, with rental values also rising, due to high demand and low housing supply.

As sales prices continue to increase, it is getting harder for would-be homebuyers to secure finance to buy property in central London, forcing many people into rental accommodation instead, pushing rental values higher in the process.

Robert Bartlett, Chesterton Humberts' CEO, says: "The prime London residential lettings market is facing a variety of challenges this year and in spite of the ongoing economic gloom, overall rents are continuing to increase. Good quality rental properties are being let at record prices and in record time."

One area where the housing market is going from strength to strength is Fitzrovia, near London's West End, which is home to an array of upmarket properties and various celebrities.

 

 

A limited supply of houses and flats for sale in Fitzrovia, in stark contrast to a high level of demand, has pushed property prices higher in the area, driven primarily by a growing influx of overseas buyers.

"The London property market continues to be seen as a safe haven in turbulent economic times, with record numbers of properties being sold to international buyers," said Ed Mead, sales director, Douglas & Gordon.

Demand is also being fuelled by more property investors looking to add to their property portfolios, thanks to the fact that many people are looking at property to rent in Fitzrovia, thanks to its close proximity to London's West End, along with a wide selection of local attractions and amenities.

 

Andrew Ellinas, director of Sandfords, says that the "the Fitzrovia lifestyle" appeals to many people attracted to "art galleries enthused with vibrant bars, outstanding restaurants, famous landmarks like the BT Tower, the open spaces of Regents Park and the fashionable boutiques of Marylebone High Street".

Whether flats or houses to rent in Fitzrovia, good quality properties rarely stay on the market very long, as tenants snap them up amid fierce competition for sought-after homes in the area. This is creating a severe supply-demand imbalance that is unlikely to change until more new homes are developed, in light of London's rising population.

 

 

The Institute for Public Policy Research (IPPR) reports that England is facing a "growing housing crisis", with an estimated shortfall of 750,000 homes by 2025.

Nationally, the think tank says that up to 280,000 new homes are required each year over the next 16 years, with the biggest requirement in London, particularly popular areas like Fitzrovia.

Unless property supply increases in the near future property prices and rents are likely to rise further, regardless of the state of the economy, as housing remains a necessity that we all require.

"Whether the economy performs well or poorly, a serious gap looms between housing supply and demand," said IPPR director Nick Pearce. "Our ageing population and rising expectations for living standards are going to drive up demand, but if there is no change in housing policy it will seriously hold back supply."

Homebuyers looking to areas beyond Central London

Central London estate agents have reaped the rewards from a surge in property values in recent years, propped up by low interest rates and international buyers.

"Since the depth of the property bust in 2009, prices in England and Wales have floated up by a gentle 11.2 per cent but flats in Central London have rocketed ahead," said Andrew Ellinas, director of leading estate agents Sandfords.

The average price of a residential property in prime central London has increased by 35 per cent since 2009, with greater growth anticipated in the short to medium term, according to CBRE.

Mark Collins, head of residential, CBRE, said: "Superprime residential markets have emerged as one of the only secure investment options for the world's super wealthy. The very top-end of the market remains exclusive, involving only a handful of cities, and within this elite group London is still one of the most compelling choices."

But while many homebuyers continue to snap up properties in central London, others are now looking beyond the heart of the capital to second-tier markets – searching properties for sale in Little Venice, Maida Vale, Swiss Cottage and Camden, among other popular areas. 

Although some home purchasers are buying property to live in, demand is being significantly boosted by a rise in activity among property investors seeking to capitalise on good prospects for capital growth and high rental returns.

"London is seen as a sound investment, with prices continuing to rise in good locations," said Ingrid Skinner of developer Taylor Wimpey. "This has seen investors … spreading beyond the super-prime market to areas that offer good rental returns in solid residential areas."

It is unsurprising that more property investors are targeting homes in London, given that rents, currently at an all-time high in the capital, continue to rise.
 

The average rent in London increased by 0.6 per cent to £1,038 per month in May, surpassing the previous high of £1,033 in November, according to latest buy-to-let index from LSL Property Services. This compares with an average of £712 per month in England and Wales.

David Newnes, director of LSL Property Services, said: "The end of spring has brought with it renewed activity in the rental market, and rents have returned to the level seen before the impact of the stamp duty deadline [in March 2012] rush by first time buyers … strong tenant competition is pushing up rents as a result.

High rents and rock-bottom savings rates are preventing many people from being able to save for the larger deposits banks now require to buy property. Consequently, fewer tenants are able to leave the rented sector.

But it is not just involuntary renters that are adding to demand, particularly in sought-after areas. Many would-be homebuyers are opting to rent as they adopt a wait-and-see approach to the property market in-light of the recession and wider eurozone crisis. 

This means that the high number of people looking for a house or flat to rent in Little Venice, Maida Vale, Swiss Cottage and other desirable areas, is unlikely to wane anytime soon.

High Demand for Property for Sale in Fitzrovia

Despite the economic crisis and eurozone woes, the booming property market in London shows very few signs of slowing, particularly in prime central London were property prices are at a record high.

The latest data produced by CBRE shows that the average price of a home in prime central London has appreciated by 35 per cent over the last three years and is now 16 per cent above the 2007 peak.

Furthermore, the property group estimates that the average price of a home in the heart of the capital will appreciate by six per cent this year in stark contrast to the rest of the UK.

The property market in London is ultimately being supported by rising demand from national and international homebuyers, while housing supply is being restricted by a lack of new build homes. This has created a shortage of property for sale in Fitzrovia, Chelsea, Kensington and Marylebone, among other desirable places in London. 

 

"An acute stock shortage and unprecedented buyer demand in prime areas is helping to underpin prices by as much as 10% in the last 12 months as many buyers compete to take advantage of excellent yields and prospect for strong capital growth," said Andrew Ellinas, Director of Sandfords.

Family homes are generally the most desirable properties in London, which will explain why there are very few houses for sale in Fitzrovia or Chelsea, or any other sought after area with easy access to top schools, established infrastructure and excellent transport links. 

 

"London's time-zone, infrastructure, education system and the language help make it the top choice location for a trophy asset," said Mark Collins, head of residential, CBRE.

He added: "London's limited source of developable land means that supply will almost never satisfy demand."

Nevertheless, flats for sale in Fitzrovia and other desirable areas are also in great demand, from both owner occupiers and property investors seeking to cash-in on high tenant demand and rental values. 

 

 

 
According to Homelet, tenants in London are now paying an average of £1,187 a month to rent a home, which is much higher than those living in rented homes in other parts of the UK who are paying an average of £653 per month in rent.

HomeLet's Managing Director, Ian Fraser, explained: "There's been a steep increase in the number of young people and families renting a home due to being unable to secure a mortgage."

Unsurprisingly, with rents rising, more landlords are adding to their residential property portfolios, research by Paragon Mortgages shows.

According to the specialist buy-to-let mortgage lender, during the second quarter of 2012, landlords' property portfolios increased to an average of 14.1, down from 12.9 in the first quarter of this year. This is also an increase on the second quarter of 2011 when the average portfolio size was 12.5 properties.

A fifth (21 per cent) of landlords who took part in the quarterly Private Rented Sector (PRS) Trends Survey, said that they were planning to add to their portfolios during the third quarter.

John Heron, Managing Director of Paragon Mortgages, said: "The fact that landlords are planning to make further investments in their property portfolios is positive news. It shows their appetite to grow their business to meet the on-going demands from tenants and demonstrates the viability of the UK's PRS."

Demand for Property to rent in London Continues to Soar

Now is a generally good time to be a landlord in London. Tenant demand is rising at a rapid pace while the supply of residential properties coming into the market remains historically low, pushing rents higher in the process.

The housing shortage is owed in part to the lack of new build homes coming onto the market. Residential property construction levels are at their lowest level since the 1920s, and this trend is expected to continue for the foreseeable future.

Furthermore, tight mortgage lending conditions are denying many people the opportunity to buy property, forcing them into rental accommodation instead.

Unsurprisingly, landlords are vying against one another to take advantage of favourable market conditions and add to their property portfolios.

A study by independent researchers BDRC Continental revealed that during the first three months of this year, landlords increased their portfolio size by an average of 1.8 properties. Yet of those landlords that took part in the survey, 20 percent said that they would seek to buy another investment home within the next 12 months.

David Salusbury of the National Landlords Association said: "Early signs of increasing property acquisition suggest that landlords are feeling more confident about future prospects of the buy-to-let market."

Fierce competition for homes in London means that rent costs tenants an average of 40 per cent of their net income, with 16 per cent of renters in the capital paying more than 60% of their take home pay, according to Rightmove's latest consumer confidence survey.

Demand for property to rent in London is generally greatest in primary areas in boroughs like Westminster, Kensington and Chelsea as well as Hammersmith and Fulham. 

Robert Bartlett, CEO of Central London estate agents Chesterton Humberts, comments: "The prime London residential market continues to outperform the UK property market."

Leading estate agents Sandfords report that Marylebone is currently one of the most sought-after areas to live in the capital, reflected by the lack of property to rent in Marylebone in relation to demand. 

"Prices are high and supply short in prime Marylebone", said Sandfords' Andrew Ellinas. "For those looking to secure their offspring in good educational establishments, Marylebone has well regarded business schools, increasing its popularity with people from the UK and overseas."

Fierce competition for homes in the capital means that high rental demand is also rippling out to secondary areas.

"Agents report that the seemingly incessant demand is causing rental price pressure to spill over into other previously less sought-after areas," said Rightmove director Miles Shipside.

With the private-rented sector playing an increasingly important role in the provision of housing, John Heron, director of Paragon Mortgages, says that he is not surprised that landlords are benefitting from attractive investment conditions in the market.

"There is still a long way to go to meet the increasingly high level of tenant demand," he said. "More investment across the private rented sector is needed during the coming year to help to meet this demand."

St John's Wood Property Market Remains Buoyant

Whether renting or buying a property in London, St John's Wood remains one of the most desirable places to live in the capital, reflected by the fact that it is home to some of the most expensive properties in the world.

This prosperous part of North West London, in the City of Westminster, only a 15 minute walk from Baker Street and London's West End, features a high proportion of independent retailers and offers easy access to the open green spaces of Primrose Hill and Regent's Park. It is also the location of the famous Lord's Cricket ground and Abbey Road Studios, where The Beatles recorded their Abbey Road album.

St John's Wood estate agents report that property prices in and around St John's Wood have continued to soar, despite the global economic uncertainty, eurozone woes, and the recent hike in stamp duty at the upper end of the market to seven per cent.

Liam Bailey, head of residential research at Knight Frank, commented: "Early indications of the impact of the recent changes to stamp duty are that the market is so far proving resilient."

According to a new Knight Frank survey, home values in prime areas such as the Borough of Westminster, increased by 1.1 per cent in April and are now 11.4 per cent higher compared to the corresponding month last year.

Andrew Ellinas, director at Sandfords Central London estate agents, said: "In 2011, Westminster and Camden together accounted for more £1 million plus properties than Kensington and Chelsea - most of them in Sandfords' domain of Marylebone, Regent's Park and St John's Wood."

Demand for properties in St John's Wood is being primarily fuelled by a growing influx of foreign purchasers taking advantage of a historically weak pound, which has actually reduced the cost of buying property in the UK for some foreign buyers, making central London a particularly sound property investment option.

"Many [overseas property buyers] are looking for a safe haven asset class to take their money away from the turbulence of the eurozone and the Arab Spring," said Naomi Heaton, chief executive of London Central Portfolio.

As well as high demand from property buyers, there has also been a shift towards more people looking at property to rent in St John's Wood as a preferred lifestyle choice; an attractive proposition for property investors.

The high level of rental demand is reflected by the shortage of houses and flats to rent in St John's Wood, with most properties often let within days of being placed onto the rental market.

Strong tenant demand is expected to push rents up by an average of five per cent in 2012, following an average gain of 12% in 2011, with further growth anticipated moving forward, according to property consultants Jones Lang LaSalle.

London's population has grown every year since 1988, and it is likely that it will continue its steady growth over the next few years, further fuelling demand for rental accommodation in St John's Wood and its surrounding areas, including Hampstead, according to various Hampstead estate agents.

"There are likely to be 150,000 more London households renting [by 2015] than before the financial crisis," said Jones Lang LaSalle's research director Jon Neale.