Property in London: Still a Good Investment?

Property in London: Still a Good Investment?
"You can't go wrong with a property in central London," you
often hear people say.

Fact is, they are right. Property development in London is
booming. Since London's trade is primarily in financial
services, companies are set up, bought out and financed
everyday. This translates to a real estate and property
development industry that is active and flourishing.

More than ever, the price of prime residential property in
central London continues to rise. The primary reason cited
for this phenomenon is the lack of supply of suitable
properties.

The steady rise in residential prices has also been greatly
influenced by the buying pattern of foreign buyers.
Traditionally, foreigners who work in London purchase
property for their residence or occupation. They used to
immediately sell this property once they returned to their
respective homes or countries.

However, the trend has been slowly shifting. In 2004 it is
estimated that a foreign buyer would hold on to his
property for less than a year before selling it. In more
recent years, the period has risen to an average of 20
months. Foreign buyers have been retaining their properties
longer because they now see them as investments and assets,
considering the rising prices and short supply of real
estate in central London.

Since more and more central London property is retained,
property shortage has become severe and real estate values
remain high. Unlike domestic property investors who usually
release a previous property back into the market upon
buying a new one, foreign buyers hold on to their property
as an investment.

Foreign property owners who no longer live in the city
utilize their property as rentals to reap income from
tenants. With the equally high cost of rental units, this
has become an easily profitable opportunity. If this trend
continues, central London property prices would remain
substantially high.

Though London property remains one of the most solid
investments, a quick stroll around the city would reveal
some glaring contradictions. Various flats would claim that
they are "80% sold" yet the signs on the windows of
commercial spaces announce "units to let."

Sadly, a house in London is still not affordable to those
living on average incomes. The price-to-income ratio of
residential property is more that five times higher than in
other parts of the country. Being one of the most expensive
cities in the world, the cost of utilities, services and
taxes are constantly increasing. This translates to a
rapidly falling disposable income.

Financial analysts have predicted that interest and
mortgage rates are most likely to fall. Unemployment and
inflation rates are increasing. Experts say that the growth
of house prices cannot even keep up with the rise in the
inflation rate. Property values in London have become so
high that it is restricting. Many want to cling to the hope
that falling interest rates will save the London real
estate market. Otherwise, although property in central
London is indeed valuable, not many are willing, or able,
to buy.

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Parmdeep Vadesha is a property investment expert and
founder of the largest community of property entrepreneurs
on the web who buy below market value properties from
distressed homeowners facing repossession, divorce and
bankruptcy. He writes a monthly newsletter for over 70,000
property investors worldwide -
http://www.Property-System.com