London’s luxury property market has been attracting an increasing amount of attention, but how strong is the rental market and what should investors expect going forward?
Asian investment in prime central London property has been booming as the search for security and yield heats up, so will London’s luxury residential market deliver?
Hong Kong’s Loss is London’s Gain
With the volatility in London’s central property market believed to be over, global funds and direct investment are acquiring prime properties at an incredible pace.
London was one of just five global cities to record double-digit growth during the third quarter. Residential prices now stand 52% higher than in 2009, drawing attention to opportunities overlooked by billion-dollar Asian funds moving into the local commercial market.
New moves aimed to cool the market by the government in Hong Kong are beginning to have an impact, which is causing many investors to begin to look elsewhere. According to the South China Morning Post, the Hong Kong government is targeting a 20% drop in home prices, though from previous experiences, savvy investors know that once a slide begins, it normally goes far deeper than planned.
The shift is already being evidenced as Asian buyers surpass the British and Americans, making up 29% of transactions in London.
Interestingly, it isn’t the immense safety or growth prospects which the city offers that are the biggest driving factors right now; it is now yield and income which most investors are crediting for their moves.
Investors are no longer finding this level of income in New York or Hong Kong, making London’s luxury residential market the most advantageous place to invest.
London Rental Property Performance
How strong is the city’s rental market and where is it going?
Bloomberg News reports that London rents are up 6% year-over-year as of November 2012, even with recent job cuts in the financial services sector, leaving plenty of room for growth as recovery takes place.
Statistics from HomeLet.co.uk show an impressive 32% increase in greater London rents in the last three years, compared with just 7% for the rest of the country.
Perhaps most important are recent forecasts predicting rents in the capital to grow 26.4% between now and 2017.
A closer look a current rents in the city offer more insight into how much rent can be expected:
• Hammersmith: A four-bedroom semi-detached home for 2,500 GBP per week
• Shepherd’s Bush: A four-bedroom home for 1,400 GBP per week
• Notting Hill: A six-bedroom home for 30,000 GBP per week
• Piccadilly: A two-bedroom home in W1/ Mayfair for 1,400 GBP per week
• Pimlico: A four-bedroom town house for 2,500 GBP per week
This is a superb opportunity for forward-thinking investors to seize on the many benefits that investing in prime London residential property has to offer.
Beyond the prestige, the safe-haven status and capital gain potential associated with the luxury London residential market are already some of the most attractive among global property markets. However, as always, the advantages go to those who act early.
