London’s stagnating property market – it’s a question of affordability

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Rapid house price increases, government interventional policies such as stamp duty charges, Brexit and a reluctance to buy in the capital has meant that there is now limited scope for growth in London’s property market. Sellers are recognising the sluggish environment and are more apprehensive about putting their property on the market. According to Rightmove, asking prices in the capital overall were down 1% in February 2018 compared to the previous year, and are likely to fall a further 2% in 2018. The capital’s housing market has been lagging against the rest of the UK with sellers launching their properties on Rightmove at 1.4% cheaper than the previous month.

King’s Cross has recently emerged as not only one of the best-connected places in London but a vibrant rejuvenated neighbourhood. Positioned as an important hub for technology and innovation continuously attracting new companies to King’s Cross regeneration scheme thanks to the superior transport links and easy access. Google GBP 1 Billion head office located in Kings Cross.

Whilst buyer apprehension has had a negative impact on the wider London property market, there is still positive sentiment in investing elsewhere in the United Kingdom. For those who recognise the benefit of buying property for the occupation of city professionals but who do not wish to pour money into the capital’s faltering market, there are opportunities in satellite towns and areas that surround the capital.

One such place the new Great Northern train route will service is Stevenage. Not only will this new route open previously hard to reach places in London, but there are also plans to introduce more fast-train services to the station, ensuring that commuters can reach the capital quickly. The improving transport network has raised the town’s profile with investors and those looking for somewhere to live alike. One-bedroom flats in King’s Cross in London start from R11.3m, whereas flats in Stevenage sell for an average of R3.28m and King’s Cross can be reached in around twenty minutes, so it is a sensible alternative for cash-strapped professionals who are priced out of the capital. The town’s growing desirability is reflected in the price of property, which experienced the third highest growth in property prices out of 60 towns and cities in England and Wales over the last decade.

Moorgate is in the heart of the financial district and London’s Tech City where digital companies are located

For good levels of capital growth, the property must be strategically located in an area where prices are still affordable, and there is a good concentration of people who wish to buy. The average salary in the UK is R584,648, so a couple will be on R1.16m. With the average property price in Stevenage being R4.89m, couples can easily afford a property in Stevenage if they have a reasonable deposit. This is clearly more affordable than Greater London, where the average house price is £619,181, almost 10x a combined average salary.

House prices in the town rose by 58.5% according to HouseSimple between 2007 and 2017, placing it just behind London and Cambridge. Average property prices in Stevenage remain modest compared to those in the capital (R4.89m overall average v R10.3m overall average in London). With the improvements being made to the transport network along with a R5.8bn injection to regenerate the town centre, there is more scope for capital growth for those who purchase property there.

Park Place is a new residential property for sale in Stevenage that will comprise 202 one, two and three-bedroom Manhattan-style apartments. Interiors will be modern and stylish, to reflect the town’s developing centre, and the kitchens and bathrooms will have chrome finishes, to add a touch of high end style. A dedicated concierge and fibre-optic broadband will be just a few of the premium services residents of Park Place will be able to enjoy, which will further boost its appeal to the discerning professional.

Park Place is a short walk from Stevenage’s train station, which makes it convenient for professionals who commute to London. It is also close to Westgate shopping centre and the Garden Cities of Welwyn and Letchworth for weekend exploring. Apartments in the complex start from R3.26m and an appealing aspect of the investment is the capital gains that can be achieved, as property prices in Stevenage are predicted to rise by 24% by 2020 as it becomes increasingly relied upon to cater for London’s overspill.

How can South Africans make gains from the pound’s weakness and the falling repo rate?

In South Africa, the repo rate has been cut by 25bps, from 6.75% to 6.5%. This is great news for the property market, as typically a decrease in interest rates causes house price growth. Those with savings may find the news not as encouraging, as they will see much lower returns. The rand has appreciated in value compared to the pound sterling (currently 16.79 ZAR :1 GBP (04.04.18), therefore it might be prudent to consider diversifying a property investment portfolio to include overseas property whilst the rand is still strong. If investors keep their savings in a South African bank account, they will be achieving a lower risk adjusted return on their money. With the backdrop of the land expropriation issue, there is more uncertainty than is priced in now with the positive Cyril effect.

Contact UK property investment company, One Touch Property today to learn more about how London’s stagnating property market creates opportunities in its commuter towns, and how to identify them to get good levels of capital growth. One Touch Property is conducting bespoke UK property investment consultations around South Africa from April 7th – April 21st. Get in touch today to book your spot.

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