Over the past two decades the population of London has been growing by roughly a hundred thousand people a year so there’s obviously, therefore, a huge demand for pretty much every type of accommodation but also obviously is not a cheap place to invest if you live in London I’m sure you already know that and there are currently some real concerns about whether values of properties in London are going to be dropping so could this mean a fantastic opportunity for you to get out there and grab some really great deals that are going to give you a really good cash flow? Today I want to share a few ideas that are going to help you find those really great deals. Let’s start off by considering where to buy in London. I honestly think that the location you choose should really depend on the strategy that you intend to follow.
For example, if you’re looking at single buy-to-let time units you will want to check out the portico yield heat map. This is a fantastic little tool and it will show you really quite accurately where you can get some great yields although you should always do your own due diligence. If you’re looking for HMOs honestly you need to focus on where there is a tremendous demand because in some parts of London the demand is absolutely huge. For example, I was just looking at just one particular area of London and there’s currently a hundred and forty-six rooms available but it’s nearly four thousand four hundred people were looking for rooms. Honestly that’s just a huge demand, which means fewer viewings, it means fewer voids, and of course, you get better income on that property.
Other things to consider would be things like the transport links in the area. You also could consider looking for commercial opportunities rather than residential. You could invest in some office space or some warehousing or maybe some shops. The cost per square meter can be considerably less than the same cost per square meter on a residential type property. Or better yet could you maybe convert a commercial property into residential. There are some real advantages to this type of strategy such as maybe convert a shop into residential. There are some planning and some tax advantages these include dat and stamp duty. For those ideas, you will want to speak to an accountant to confirm your ideas are plausible.
You’ve got to get out there and walk the streets. For example, I was recently up in Barney and I was walking around Barney and I found that there are some fantastic opportunities that I was able to locate just by walking around and looking for potential properties where I could add real tangible value. Now, I’m not suggesting that any of these were actually on the market at the moment but when you find a place where you can clearly add some substantial value, make sure you’ve got some little leaflets with you that are ideally handwritten. I would always suggest you go and put those on the property that you’re actually thinking of buying. Now, it’s probably not going to be on market now, but will they be selling a little bit down the line? Maybe so. You’re then going to put that property onto a spreadsheet and follow up, follow up, follow up, follow up, follow up forever. Just keep writing to that property and at some point down the line they may sell if you do this enough. You may have loads of properties on your spreadsheet and ultimately this will start to generate some really good potential deals for you.
I look for empty houses but also don’t assume when you walk past the potential site and it’s got some signage that it’s already taken. Make your own inquiries. Don’t assume, but rather download the title deeds, write to the owner and maybe start an interaction with the owner because maybe you can get a fantastic deal.
Right now there is so much negativity out there at the moment in the landlord community. Of course, you’ve probably fully aware of the tax change legislation and changes in demand in some areas. Many landlords, to be honest, are kind of throwing the towel in. This could be a huge opportunity for you and there are a number of ways that you can help these landlords to create a win-win deal that works firstly for them. This could be a once-in-a-lifetime opportunity to connect with those landlords who are really unsure about what they want to do moving forward. I encourage you to think outside the box because. For example what about taking their house and converting it into two or three flats.
I’d also encourage you to maybe start thinking a little bit smaller. There are some amazing properties out there or tiny homes as I call them and I love tiny homes with some really amazing design ideas have been incorporated into them to make these tiny homes work fantastically well. Ideally, you want to try and get a place that’s going to be bigger than 30 square meters because if it’s less than 30 square meters then in many areas it can have privacy issues. Also, learn how to use creative solutions and find and help truly motivated sellers. This is a fantastic way to get real equity in properties but also can create really great win-win solutions.
If you’re going to do this, please do it legally. Go to a solicitor and get it all drawn up properly with the contract. A handshake simply isn’t good enough. Also what we’re talking about thinking outside of the box I’ve got to ask the question do you really have to invest in London? There are lots of opportunities in London, but if you’re not tied to London are there may be some better deals outside of the capital.
One of the biggest questions we always continue to get is how is Brexit impacting the London property market? One of the answers is it’s actually not been so great over the last 12 months.
Through May we’ve seen a two and a half percent overall decline in the London property prices to an average asking price of £621,000. In the hardest-hit areas, which are prime central London, we’ve seen Westminster have the largest decline of 6.3% with an average asking price of £1.4 million. Kensington and Chelsea which has the highest property values in all of the UK have seen a price average price declines of 3.9% to an average asking price of £1.6M. Outer London which has continued to benefit from large swathes of land where you can redevelop and regenerate and create whole new housing developments has actually seen 0.9% average increase to an average asking price of £521,000. There really are only two areas that haven’t seen price reductions and those are in Bexley and in Barking and Dagenham on the outer skirts of London. That’s really not surprising considering that they are some of London’s cheapest boroughs. Average asking prices there are £406,000 and £316,000, respectively.
Here is a link which shows a breakdown of the boroughs and the average changes in housing prices over the last twelve months so you can see where you live and how that compares.
London property price declines are actually particularly stark as it compares to other parts of the UK, such as Wales and the Midlands which are actually seeing average price increases. Everybody focuses a lot on Brexit but one of the other critical factors that have impacted the London property market has been the stamp duty changes that started back in December 2014, with additional increases in April of 2016 and then also interest expense reductions that have really impacted buy to let mortgages. So it’s been a series of government-induced things that have impacted the market and made the transaction volumes decline over the last 12 to 36 months.
As far as transaction volume through April we had 85,000+ transactions in London which is a 26% decline in average transactions compared to before the EU referendum in June of 2016 and a 4.6% decline annually. In Prime Central London we’ve seen a decline of 16% this is to 3,295 transactions. What does that mean for the average buyer or seller? It definitely means that at the end of the day people still need to buy and sell their homes for whatever reasons, it might not be a great time to sell just for the whim of it or to get top dollar but if you need to sell for personal reasons, I’m actually working with first-time buyers who are looking in Bexley, we’ve actually found them a great first family home that’s being sold by a couple that’s divorcing, so in that situation they have to sell and really don’t have a choice. In another situation, I have sellers who are selling because they’re looking to up-size and in that situation, while they might not get their original asking price for their current family home it does mean that when they do sell they’re going to be in a great position as a buyer to buy that next family home, so we want to make sure we look at that entire picture.
Looking At The Whole Picture
So, investors, you have to look at the whole picture. While it might be less profitable when you don’t have the benefit of the interest expense deduction that we used to have, we are able to take advantage of reduced property prices and make sure that those numbers stack up, it continues to be a low-interest-rate environment so when you factor those things in and the cost of purchasing the property and given where rental rates are, you need to make sure that you’re still getting a decent enough yield and then hopefully when the market corrects and improves you’ll be taking advantage of long-term appreciation as well.
For those buyers who are looking to buy a family home or a place to live this is absolutely the best time. There have been a lot of buyers looking at property, sitting on the fence, not sure to pull the trigger and you’re going to miss that opportunity and end up with regrets because you don’t want to buy on something that might decline. However, if you’re going to hold it for a long-term strategy, what does it matter if it declines over the next few months to another 12 to 18 months? So hopefully we’ll pick up again in the next few years, I’ve actually recently sold a property in Waterloo and our sellers there are cashing out to take their money out of the UK and buy a family home or secondary home out in France and in that situation even though it was a buyers’ market we were able to sell them for a great deal given how long that they’d owned property and they were able to take advantage and just really move on with their lives.
If you’ve got any questions about thinking about buying or selling in London, do not hesitate to get in touch with London Relocation. You can reach out and ask your questions. Call London Relocation now to get started at 800-903-1658 from the United States or from the UK +44 20 7993 0422.