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Why London remains a big draw for property investors

It’s been an astonishing year for the property market. Despite the inevitable difficulties of the pandemic, the Stamp Duty holiday has spurred a significant level of activity. It’s not just meant that brokers and lenders have formidable workloads; it’s also pushed house prices up sharply.

According to the most recent data from the Office for National Statistics, average house prices rose by 10% in the year to May 2021. To put that into context, the annual rate of house price growth a year earlier stood at just 1.1%.

However, this impact has not been equal across the country as a whole. The data from the Office for National Statistics shows that while some regions have seen double digit growth - prices in the North East for example have jumped 15.2% - others have seen far more modest changes. London has seen the slowest rate of growth at 5.2%.

 

The changing appeal of the capital

Part of this is inevitably down to the pandemic itself. The thought of living within the capital was a far more compelling one when we all spent five days a week in the office, and the many restaurants, bars, theatres and the like that you find in the city were all open.

But for the bulk of the last 18 months, that hasn’t been the case. Lockdowns and other Covid restrictions have meant that many of us have re-evaluated where we are living and whether it is really worth the money we are paying. And whether you’re an owner occupier or tenant, that money can be significant if you’re living in London.

However, as is clear from the investors we have lent to in recent months, purchasing property within the capital whether to hold as a buy-to-let or flip for a profit is still an appealing prospect. The pandemic has dented some of the allure of the capital, sure, but it hasn’t removed it entirely. There are still plenty of employers - and employees for that matter - keen to get back to spending at least the bulk of the week in their offices, while the reopening of the hospitality sector means that London is starting to get back to normal.

While investors may need to be a little smarter about precisely where they invest in the capital, and the sorts of properties they invest in, there is no question that it will continue to catch the eye of those looking to get a real return from putting their money into bricks and mortar.

 

What does the future hold?

While property price growth has been slower in London, it’s important to remember that property in the capital costs far more than other regions. So a 5.2% rise on such an expensive asset translates into a pretty large cash return.

Further growth is expected too, as the reopening of the city reminds buyers and tenants alike of the appeal of living in the UK’s biggest city. Research by Savills has forecast growth of around 1.5% in London house prices this year, jumping to 4% next year. By 2025, it predicts that prices in the capital will be around 12.6% higher than they are today - an enticing prospect for property investors.

 

Working with the right lenders

The bridging market is a fast-moving one; the investors who so often make use of bridging loans generally want to move quickly once they spot a prime investment property, so that they can get ahead of the competition and secure the deal. There are few areas of the country where this is clearer than when looking to buy in the capital.

As a result, lenders who understand those time pressures and are able to deliver the funding swiftly and reliably will always be well regarded among brokers who have seen first-hand how frustrating it can be when a lender fails to keep their side of the bargain.

No matter what happens to the value of properties within the capital, it’s crucial for any lenders who want to succeed in the bridging market to ensure that they grasp what really matters to brokers and their clients, and deliver the required levels of service that will give investors an edge in this competitive market.

Marios Theophanous, Credit Manager, London Credit