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Investors lean towards London as house prices rise

Various sources have commented on the success of London’s property market this past year as the value of flats and maisonettes increased by 9%.  According to Herddle analysis of government data, this accumulated to an average of £442,304.  Further to this, the average price of all London properties has risen by 9.7%, with a favourable inflation rate of 0.8%, in 2020 in spite of the onset of tough economic times due to the pandemic and Brexit completion.

The chief executive of Herddle commented on the rewards reaped by those who showed resilience to the fluctuating market by holding firm to their London investments. The significant increase to the value of property in London combined with the advantageous inflation rate consequentially provided a lucrative return for many investors who held their nerve.

Experts anticipate that the fluctuating nature of the economic market will continue due to newly emerging strains of the Covid-19 virus and the regulatory changes due to the completion of Brexit. There may yet be more changes to economic volatility and this can provide a substantial risk to investment prospects. Yet the trend of late, certainly in respect to the London property market, is that this volatility can provide greater prospects for return as residential demand in the region continues to exceed expectations.

It has also been suggested that this could be a direct effect of the increasing appeal of residential property in London to overseas investors. Political fallout from the Brexit transition has caused a devaluation in Sterling currency, creating a more favourable exchange rate with many major currencies. This in addition to the commencement of a new path for BNO citizens to acquire status to reside permanently in the UK has increased foreign investment which already contributed a substantial portion of capital in the London property market.  There has rarely been a more cost-effective time for this as the onset of an additional 3% Stamp Duty Tax charge onto overseas property transactions in April has caused demand to surge. Whilst industry professionals have assured that this would not deter foreign investment in the future, it is likely that this additional tax coming into force will provide an incentive for transactions to complete before this date. It is this constant pattern of demand exceeding supply that allows London’s property market to remain resilient in the face of uncertainty.

London operates as a microclimate for investment in the sense that its economic success is self-sustaining and virtually independent of the national economic trends in the UK. This is particularly advantageous as it provides an extra level of security for investment as it maintains its own economic strength. Furthermore, the prestige of London real estate has no parallel as these most famous streets continue to attract those with a taste for luxury and glamour, streets such as Bishops Avenue also known as ‘billionaire row’, and the infamous Candy brothers’ property developments continue to accumulate a significant amount of profit as their One Hyde Park development in the West of London becomes the UK’s most expensive home valued at £160 million. According to a collection of housing data collected over the past decade, Greater London as the average price of a home increased by 78%. From 2007 to 2017, London’s most expensive borough Kensington and Chelsea saw a 102% increase to an average worth of £1.4 million. Concerns of a London property house price bubble have been disbanded with the continuing resilience of the market and the constantly increasing demand for residential property driving rental yields to record levels, with forecasts predicting a confident continuance of this thriving market for its long-term prospects.