London and UK Property Investment Blog

By Brett Alegre-Wood | [fa icon="calendar"] December 5, 2018

Could this overlooked UK city produce turbo-charged profits?

Could-this-overlooked-UK-city-produce-turbo-charged-profits

It’s time to ignore the experts who got it so wrong and invest in London

Hey, I want to let you into a secret. There’s a city in the UK that looks ripe for property investors to plunder. Yet it has been largely overlooked, and average house prices there have stagnated over the last 12 months. What makes me confident about the potential to profit from long-term property investment in this ‘forgotten’ city? Here are just a few of the reasons:

  • Massive regeneration taking place and revitalising swathes of brownfield land
  • Enormous infrastructure upgrading and spending
  • Huge population growth-boosting demand for new homes
  • Continuous undersupply of new homes to satisfy demand
  • Increasing FDI in tomorrow’s digital economy

Which is this city that has so much going for it that I’m becoming increasingly bullish of its prospects for profitable property investment? London.

It’s time to forget all the doom and gloom of the ‘property experts’ who predicted London prices would collapse by as much as 30% in the two years after the vote for Brexit. It’s time to do your research and invest in London property.

Regeneration is creating new prime London property

Until a few years ago, prime London property was very much limited to the exclusive postcodes of Knightsbridge, Mayfair, Kensington, Chelsea and Park Lane. However, as those locations became unaffordable and unobtainable, developers have begun to create a new prime London.

Regeneration is transforming areas that were once considered undesirable backwaters. New developments overlooking waterways and redefining London’s skyline are magnetic to a growing population. Price levels in areas such as Battersea, Stratford and Greenwich Peninsula are rising against the overall London trend. Aldgate, Shoreditch, and areas fanning eastwards and southwards from central London are witnessing massive regeneration spending.

The result is an eclectic mix of new and old, with residents benefitting from London’s job opportunities and higher salaries, and its culture and nightlife, within a few minutes by travel on an improving transport system.

Infrastructure spending is redefining London travel

HS2 looks set to transform the potential of the Midlands and the North. Massive investment has been committed to it. Yet half of all of the UK’s spending on infrastructure is centred on London – a colossal £1,943 per London resident, according to thinktank IPPR North. Around £18 billion in 2016/17 and going forward.

The star spends in London is Crossrail, costing around £5 billion. But it is not the only spending in the city. Other projects that are underway or being considered include:

  • The extension of the Elizabeth line to Ebbsfleet in Kent
  • Crossrail 2: the new southwest – northeast connection that will transform journey times and connectivity from the Solent to The Wash
  • An extension of the Croydon tram network towards Sutton
  • Extending the Bakerloo line to Lewisham via the Old Kent Road and New Cross Gate
  • Continued investment in the Royal Docks as a distinctive location for business and culture

In a report published by the London Assembly in July 2018, Mayor Sadiq Khan said investment in such schemes would create nearly 400,000 new jobs in the city, increase the size of London’s economy by £33 billion, and enable the building of 365,000 new homes.

17% population growth expected by 2050

London will need those new homes that Sadiq Khan believes could be enabled by infrastructure spending, and plenty more besides. The population of London has been growing at 100,000 per year for several years, despite outward migration rising and boosting the population in commuter towns.

The London Assembly is working on numbers that forecast the city’s population will grow by 17% in the next 30 years – a huge increase of 1.3 million on the current number. In response, Sadiq Khan has said that London will need to deliver 66,000 new homes each year.

The growth of London’s population could be even more dramatic. JLL expects the capital’s population to continue to grow by 100,000 each year for the next two decades. If its forecast proves to be correct, new homes targets could prove woefully short of the actual need.

Not enough new homes are being built in London

The mayor may desire 66,000 new homes each year in the capital, but housebuilders are not able to meet his demands. Part of the problem is the planning permission regulations that Khan has put in place. While there are large brownfield sites available for development, Khan is insisting that such developments are accompanied by replacement of currently derelict industrial and commercial capacity. Consequently, many of these sites are considered uneconomic to develop, and smaller sites are being regenerated more readily.

The result has been a woeful shortfall of new homes built in London. In the year to June 2017, just 38,200 Energy Performance Certificates were granted – a good indication of how many new homes have been delivered. In the calendar year 2017, new home completions had increased to 39,560 – still little more than half of the target. But the shortfall could be worse. Savills expects the number of new homes completed per year in London to fall to around 34,000 by 2021. This is a chronic shortage from need and the mayor’s target.

London is the centre of Europe’s digital economy

They all said that the London economy would crumble immediately after the EU Referendum vote. You might remember the forecasts of between 80,000 and 100,000 job losses in the financial sector alone. These forecasts have now been scaled back, to no more than 4,700.

It was also forecast that inward foreign direct investment would collapse. In fact, in 2017 the number of FDI projects funded in London rose to 459 from 446 the year before. While investment into the financial services sector fell by around 17%, FDI into the rapid growth digital sector soared – up 34% in London, a greater increase than in similar projects funded by FDI into Europe. This is great news for the London jobs market moving ahead – and should help to future-proof the capital’s economy.

All great reasons to invest in property in London, but not the only reasons. As ever, though, the profit potential isn’t equal across the capital. To find out where our research tells us are the best areas to buy property in London, get in touch with Gladfish today. on +44 (0)207 923 6100.

Live with passion

Brett Alegre-Wood

Topics: Best Places To Invest Investment Research Investment Education Professional Investors

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