London has always been one of the strongest property markets in the world, but it’s now facing one of the toughest times in its history.
Making a profit is becoming increasingly difficult for property investors in London, as prices are falling, and the political and economic climate are continuing to display uncertainty.
Recent figures
Recent house price figures released by Halifax show that London was one of just two areas in the country to experience falling house prices in March 2018, compared with the same month last year. House prices in the city dropped by an average of 1%, showing just how things are changing.
There are, of course, some areas of London that are still doing well. Up-and-coming areas are showing stronger prices than the rest of the city, but the overall property market in London has started to stagnate. All of this makes it vital for property investors to plan ahead, understand what’s going on and adapt accordingly.
Commercial strategy
While it can be extremely tempting to find a property and renovate it to turn a profit, this is becoming a more challenging way of making money. In order to ensure profit is made on an investment like this, calculations must be made using clear commercial strategy.
It’s not something to take lightly for the casual investor, in other words. Planning for every eventuality is more important now than it has been in many years. Whether investors are considering holiday lettings, a development or buy-to-let property in London, a plan must be in place right from the start.
Tough market
Selecting the right kind of property investment is also more important, as the market is undoubtedly tougher for investors and buy-to-let landlords. A major challenge for those considering buying a second property is the 3% stamp duty surcharge that was applied to extra property acquisition in 2017. This is particularly problematic for higher value purchases, which are par for the course in London.
Investors must be able to cover these costs and make a profit when letting or selling the property.
Legislative changes
Many investors are starting to look outside of London to make the most of their investment. While it’s true that investing in properties in regional areas of the UK is becoming more popular, there is still scope for a decent ROI (return on investment) in London. It just takes more planning and a deeper understanding of the factors affecting the property market.
Another factor that investors should consider is the introduction of Section 24. This legislation means that mortgage costs as well as other borrowing costs, won’t be eligible for offsetting against tax calculations.
Despite these challenges, and the likely political and economic changes we’re facing as we move towards Brexit in 2019, property investment in London is still a viable choice. It is still lucrative as long as the right advice is sought and acted on by the investor.
About Samir Salya
Samir Salya is the Chairman of Reign Holdings and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.