London residential property market continues to lure investors despite the delicate condition of the economy and the dull nature of the UK housing market. Property prices and rental values have risen sharply in recent years and despite tentative signs that the property market may slow in the short term, property prices look set to soar in the longer term.
London’s population growth is the fastest in the country and the dearth of new homes being developed to cater for rising demand from home buyers and renters is getting stronger by the day.
The government estimates a rise in household numbers in London of between 34,000 and 38,000 annually up to 2028. But based on development levels over the last decade, a realistic estimate of the number of homes which will actually be delivered each year is 21,000.
Property price growth in the prime central London market continued through October with a further 0.8% rise compared to the previous month, according to the Knight Frank Prime Central London Sales Index. Property prices have been on an upswing on a monthly basis since November 2010 and stand 52% above the post-financial crisis low of March 2009.
Currently almost two thirds of households rent in inner London and 40% in outer areas, are roughly equally divided between private and social housing. While some tenants are attracted by the flexibility of the private property rental sector, many are unable to buy due to high house prices and stringent mortgage lending criteria.
The impending problem has only one solution. Unless there is huge rise in the supply of new homes developed in London each year, future property prices are likely to shoot through the roof, leaving existing homeowners and those buying property in London with a bright chance of prospering from future capital growth and higher rental returns.