UK PROPERTY MARKET UPDATE: march 2024
April 03, 2023
What is going on in the London property market . Is now a good time to buy?
A wise man once said investing was not about timing the market but about time in the market. Whether it be shares or property, repeat studies show how investors who try to time the market lose out by suffering costly missed returns and lost capital appreciation.
If, for example, you were trying to time the market as a UK property investor, at what point would you have jumped in or out in the last 20 years? Could you have navigated the 2008 financial crisis? Brexit? The Covid pandemic? The rising inflation of the six to nine months? Perhaps you might have lost your nerve and cashed out while you could. Yet, over the last 20 years, house prices in London have risen by 166% despite all these events for those who bought and held – happy days. And that is what we mean by time in the market; more than time in the market is generally well spent.
In this monthly update, we will look specifically at the London market, where exciting and recent developments (excuse the pun) make London the flavor of the day.
London: Opportunity knocks
We’re now seeing a reversal of the effects of the pandemic on the London property market. Renters are moving back into the city. According to Foxtons, in 2022, 0.7 renters were moving out for every one renter moving in; London is once again back to a net gain of tenants. And a gain it is, with Foxtons (alongside other agencies) reporting its highest-ever annual level of renters per property listed to rent: 22.9.
London is where it’s at for buy-to-let landlords.
Home to 40% of all private rental households in England and Wales
30% of all households in London are private rental sector (nationwide, it’s 19%)
1 in 9 new build homes in the capital’s supply pipeline are BTR (Build-to-rent)
For landlords, it has rarely been a better time.
But, the unprecedented demand for quality properties to rent is not even the most exciting thing for investors. Instead, it’s where folks are looking to rent because we’re now seeing the upside of years of investment in primary transport and infrastructure projects – and it is changing the city as we know it for both tenants and landlords.
But, the unprecedented demand for quality properties to rent is not even the most interesting thing for investors right now. Instead, it’s where folks are looking to rent, because we’re now seeing the upside of years of investment in major transport and infrastructure projects – and it is changing the city as we know it, for both tenants and landlords.
The growth of “commutable” London
In 2016, 27% of Londoners working in Central London lived in its outer boroughs. Today, this figure is 39%. Improved rail links like Crossrail and better cycle lanes have enabled living further without compromising commute time. This year Foxtons reported that 40% of applicants are finding a home OUTSIDE of their initial search area which we regard as liveable London is expanding.
Dataloft shows a 38% rise in renter registrations in Zones 3-6 between 2021-2022. In these zones, the number of renters per available property sits higher than the city average at 27.6. And the gross average yields outperform the city average too – 5.8% compared to 5.4%. Excellent returns by London standards.
So far in 2023, 15% of all purchases have come from overseas investors; attracted by the position of sterling but also by the unprecedented rents and rental demand; in the last year alone, London rents have increased by 20.2%, with zone one at the highest end of that increase at 26.6%.
“The old adage that you make money when you buy, not sell, will be particularly important this year.”
- Jean Jameson, Chief Sales Officer, Foxtons
It’s not just at the investor level of the market where we’re seeing movement; movement amongst first-time buyers is a good bellwether.
Since the changes to Stamp Duty in September First Time buyers are responsible for one in every 2 apartments sold in London; prior to that the rate was 1 in 4. And we all know that first time buyer activity is fundamental to a healthy housing market. At the opposite end of the spectrum, prime sales are at their highest since 2016; driven by overseas buyers particularly from the USA but also from Hong Kong thanks to the government’s British National (Overseas) visa scheme with the territory. Beyond the headlines, it’s clear that there’s a lot of market activity.
Think locally, not nationally.
Price growth in some regions of regeneration is indeed outperforming the London average. And this is something investors should bear when navigating the market that also circles back to our opening point. We only think on a generalized scale when we talk about the economy. The challenge for property investors is to find the micro markets, the sweet spots where the most gains can be made.
The recent figures released from Foxtons show the breadth of opportunity London offers for investors who are set to benefit not only from record rents – but also, critically, long-term capital growth. Landlords less impacted by the increased cost of borrowing (although we see mortgage rates stabilizing) will be able to buy competitively and tap into the capital’s undersupplied rental pool.
Presently, only one in six overseas sales are purchased in cash. The lending is there if you look. New build properties, without doubt, offer the most appealing option to tenants right now; a recent study showed that the cost of running a new build with a B energy rating was 40p per square foot, compared with 73p for a resale apartment rated C and £1.05 for a resale apartment rated D.
about the AUTHOR
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals. The RPA Group was born out of a duty of care to provide property investors with an industry-leading and integral service, one that connects investors with quality and desirable investment opportunities, whilst providing reliable and trustworthy market commentary and analysis alongside, enabling investors to make the best, most-educated decisions for them.