Developers put London on hold as investors look to commuter towns

Commuter towns are the new hotspots

Investment news recently indicates that developers have kerbed housebuilding in London. In the city, prices and sales have fallen too. Meanwhile, investors are finding value in London’s commuter towns.

Property developers shun London at the end of 2016

In the last quarter of 2016, housebuilding in central London collapsed. A report from JLL says that only 1,270 units were started between October and December – a fall of 75% from the same quarter in 2015.

Developers are dealing in a difficult city climate. The effects of the stamp duty reform and the possible ramifications of Brexit are being felt. It’s uncertain which way London property investment will turn.

Current expectations are for prices and sales to be sluggish, with caution also prompted by the falling pound and rise in inflation. When consumer spending gets squeezed, so do property prices.

Developers are unsure whether to start building again, continue to build slowly, postpone sales launches, or offer discounts.

Home sales and prices fall in London

Home sales and prices in London are down, too. There were less than 1,900 sales – that’s down by 24%. And over the year, central London property prices were down by 5.7%. A YouGov poll found that almost one in five Londoners believe property prices will fall further as a result of Brexit.

Property prices take off in Brexit areas

Data from the ONS has been crunched by the HomeOwners Alliance. It has found that there is a Brexit effect on property prices. The areas that voted to boot EU membership into touch have seen the highest property price increases.

The fastest-growing prices are in the East of England, where the average property value has increased by 4.25% since June 2016. This is mirrored in London, where the highest price rises over the last year have been to the east of the city. East of city boroughs like Havering, Barking and Dagenham – in the commuter belt – saw prices increase by an average of 18%. (You may remember we reported on this last week, in our investment news article ‘Property prices in UK regional cities explode’.)Commuter towns are investment hotspots in today’s climate. Cheaper property and rental prices than in central London, yet close enough to be in work within an hour. With infrastructure projects like Crossrail and massive regeneration underway, investors are snapping up the more affordable property in commuter towns.

TotallyMoney has just ranked the top ten commuter towns taking into consideration property prices, commute time, cost of commute, and life satisfaction. In its top commuter towns, you’ll find the following towns that our HOTSpots algorithm identified some time ago:

  • Ebbsfleet
  • Maidenhead
  • Sevenoaks
  • Slough

What you can learn from last week’s investment news:

Analysing this investment news flow, we can come to several possible conclusions, including:

  • The price differential between central London and outer London boroughs has started to narrow.
  • The slowdown in homebuilding in central London will reduce supply, and help to alleviate concerns about an oversupply of units.
  • These dynamics should help to support London prices as we move through 2017/18.
  • Meanwhile, investors may be able to drive some good bargains and buy below market value property from developers keen to sell.
  • Commuter towns offer some superb buy-to-let and capital growth property investment opportunities in the short, medium, and long term.

We’ve identified a list of 13 commuter towns that offer exceptional potential for property investors, especially as the London market cools down. To find out more and stay abreast of all the property investment news that matters, contact one of our team today on +44 (0)207 923 6100. Ask about our newsletter. We give it to you straight. No BS. No hype.

Live with passion

Brett Alegre-Wood

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