Sam's Word 3: Current issues concerning the London residential property market

Working in South East London and the suburbs of Kent, the thread of rising demand for property is a common one throughout the regions. The biggest thing we have found since certainly the turn of the year is the growing demand for property of all types and sizes. Ostensibly when there are no properties of a certain type or size within an area, premium prices can be asked and more often than not achieved if the specification is good enough.

There are a number of factors affecting the residential market in an upward direction throughout London from Prime Central London to suburbs; foreign investment, mortgage lending constraints, a general shortage of property and in the suburbs the costs of moving eg stamp duty. All of these factors contribute to an inevitable price rise, but most importantly, or the root cause is the inexplicable rise in population and overseas investment against the shortage of property. London as a City continues to expand outwards and as the square mile grows and foreigners invest, it ripples to areas that surround it. So price increases are an issue and the need of low paid workers to find affordable accommodation nearby to the City Centre is a desperate one. I’m fortunate enough to live in a leafy suburb near to the M25, where there is still room for planning authorities to consider new residential buildings. Although when driving through Central London the number of residential buildings squeezed and crammed in to the most ludicrous of places in an attempt to facilitate access to central areas and feed demand is quite staggering. Interestingly the same is now beginning to occur in the suburbs, which can be seen as a result of the ‘ripple effect’. Some prices are inflated by Estate Agents as a result because of this demand or unrealistic vendors use it as an opportunity to command ridiculous asking prices. I have referred to this in an earlier post here.

Compared to other Cities London is an attraction for many foreign investors, Russian, Middle Eastern and European given the weak £1. Although growth in prime Central London property has a correlation with other major cities globally such as New York, Beijing, Hong Kong etc, so it’s not as though the rest of the worlds major cities in business are immune to similar property price rise levels. The outlook for the economy is steady and there will always be stable levels of employment bar another financial crash of gigantic proportions, which in my opinion is unlikely to happen given the damage the last banking crisis caused. The City is now well on the road to recovery and foreign investors recognise that. There are solid investment opportunities to be had with healthy year on year yields, plus a handy place to enjoy a short visit when the property is vacant.

I’ve been predicting this since before the financial market crash of February 2008, which was the only blip in a fast rising property market over the preceding 10 years.

Sam Samuel, MNAEA CRLM,  June 2013