Anybody who has lived in London for the past 20 years will tell you how much the city has changed. They could be talking about particular areas that were once considered undesirable, and are now flourishing, or they could be referring to the wealth of new businesses that have cropped up. They might even be talking about how crime has decreased/increased, or how their favourite local shops have closed down or moved elsewhere. Or, they could be talking about the property market. Which is exactly what we’re going to do in this blog.
We’ll analyse average housing prices, salaries and the switch from buying to renting homes that many have chosen (or, perhaps more accurately, been forced into).
Property prices in the UK have been growing in a pretty consistent manner over the years, and that rings true particularly in the nation’s capital.
The average price of a property in London, as of December 2016, is £487,649 (according to the Land Registry app)1. This is 123 percent higher than the UK average (£217,888). London is known for being an expensive place to live. It’s always been that way. But younger individuals might be shocked to see how inexpensive, by today’s standards, the housing market was in 1996. Back then, the average price of a home was £79,00022.
As you can see, the rise in prices has grown consistently at a steep rate. Only following the 2008 recession did things get a little difficult, but now, they’re back on track. At the moment, the market is currently experiencing its steepest climb yet. It remains to be seen how things will work out in the future, but they look pretty strong right now.
Salary Growth, or Lack of first time buyers
They borrowed, on average, around £55,575 from a mortgage lender in order to purchase their first home. Today, it is a very different story. Housing prices have increased, as we have seen, but salary raises haven’t been able to keep up. In 2016, a first-time-buyer typically needs to put down a deposit of £96,000 – and the average salary is only £51,000. That deposit figure is ten times what it was in 1996, while buyers today borrow an average of £174,000. So, obviously, it is now much more difficult to become a homeowner. And these figures are based on those who didmanage to get a mortgage. We don’t know the number of people who would have been able to purchase a home, if salaries had risen at the same rate as housing prices. One of the reasons housing prices have risen so fast is because of a lack of supply. Therefore, it is incredibly important that new-build projects receive significant investment. There are sure to be a few people priced out of property, who instead are renting a place to live. Which leads onto our next point as to how the property market has changed.
Buying vs Renting
In 2001, approximately 15 percent of people who were living in London did not own their property2. Instead, they were renting. Today, however, that figure has shot up to around 33 percent. It is difficult to argue that this is because of anything other than housing prices being too high for many people. Although there may be a few exceptions. Some people don’t like to be tied down, for example. But this has proven to be good news for the buy-to-let marketplace. There is a constant need for rental properties, and many investors have found success in this area. And according to research conducted by PwC, things are only going to get better for these individuals. By 2025, around 60 percent of Londoners will be renting3.
What will happen in the future?
It really is impossible to say. We can probably expect housing prices to continue rising, while the number of renters will increase too. But so much of the property market is dependent on the general state of the economy. If there are any major events – bad or good – it could really shake things up. Brexit will almost certainly play a part – but we’re still unsure on the details of that. The fact is, however, that people will always need somewhere to live. There is a definite need for more housing in London, and so the number of opportunities to invest in new developments will continue to grow.
It’s important to note that you should always consult an independent financial advisor before proceeding with an investment.This blog has not been approved as a financial promotion by Cogress Limited. Potential investors must rely on their own due diligence prior to investing.