As Singapore grapples with escalating property prices and a series of regulatory cooling measures, such as Additional Buyer Stamp Duty (ABSD), many property investors are turning their gaze abroad. Among the promising prospects, the UK property market stands out. Fueled by factors like a more robust occupancy rate and absence of ABSD, the UK presents a compelling opportunity for astute investors.
Nevertheless, the UK property market has taken an unexpected turn, making headlines as house prices undergo a significant decline. A notable catalyst for this downturn is the deliberate reduction of asking prices by sellers, a strategy that has garnered considerable attention. This substantial shift, backed by data from Nationwide, signifies a prevailing downward trajectory in the UK’s overall housing market, encompassing a range of property types, and also including new builds to resale properties.
UK house prices have exhibited a notable decline, averaging 5.2% from the peak in August 2022 to September 2023. This decline can be directly attributed to a series of successive hikes in mortgage interest rates by the Bank of England, surging from a historic low of 0.1% to the present 5.25%, as illustrated below. As a result, this transition has instilled a sense of uncertainty among potential buyers, coupled with mounting apprehensions regarding their capacity to handle increased mortgage repayments.
Source: Bank of England Database
Even though the UK may be facing a housing crisis, there seems to be an opportunity lying in the nation’s largest city and the capital, London. London boasts a diverse population and a robust job market. These factors combine to create a high-demand rental market and maintain a low vacancy rate, one of the crucial aspects for property investors to consider.
Trends in London House Prices
Even amidst recent declines in property prices, London maintains an average price of £764,885, registering a modest 2% decrease from the preceding year. However, taking a broader perspective reveals a notable 7% increase from the year 2020, showcasing the resilience and long-term growth potential of the London real estate market.
One of the important anti fragile criteria exhibited by London is the affordability factor for locals. This could be a key contributing factor to London’s sustained growth, even in the face of an overall decline in housing prices across the UK.
As evidenced, even with a 95% Loan-to-Value (LTV) loan for a £500,000 property, the mortgage payments for locals did not exceed 50% of a single individual’s salary. Affordability is even more pronounced for couples. Hence, properties priced at £500,000 appear to fall within the healthy range of affordability for locals.
With a grasp of how London properties align with anti fragile criteria, let’s delve deeper into the various regions of London and identify which areas have witnessed the most substantial growth.
Current Average Price (£)
Price in 2020
Compare to Prev Year
Compare to 2020
Source: Rightmove – updated 9 Nov 2023
While growth is noticeable in most London areas from 2020, two specific regions stand out with significant and consistent growth—North East and North West London. These areas not only showcase notable growth since 2020 but have also sustained positive momentum from the previous year. Let’s delve deeper into these two areas to uncover the reasons behind their sustained growth.
North East London
In North East London, a notable trend emerges as the majority of sales are associated with flats. Additionally, Hackney stands out as the most expensive area, while Waltham Forest claims the title of the most affordable.
With flats dominating property sales in both Hackney and Waltham Forest, a closer look at flat prices reveals intriguing insights. Hackney’s flat prices are already notably high, reaching £577,411, exceeding the £500,000 threshold and not aligning with the anti fragile criteria. Therefore, we shall focus more on Waltham Forest. Over the past two years, Waltham Forest has experienced a 1% growth from last year and an impressive 12% surge from 2020.
The surge in prices observed in Waltham Forest could be attributed to a spillover effect, wherein the soaring house prices in the central areas of London prompt a shift towards the more outer regions. This migration intensifies demand in these outer parts, subsequently driving up prices as a direct consequence.
The government’s announcement in January 2023 revealed two successful Levelling Up Fund bids dedicated to projects within Waltham Forest Council. Subsequently, in March 2023, the government granted approval for the Levelling Up Fund bid, allocating infrastructure funding for Chingford Mount and Highams Park.
Notably, Waltham Forest has secured the highest amount of funding from the Department of Levelling Up Housing and Communities (DLUHC) among all London boroughs. A substantial sum of approximately £39 million is earmarked to enhance Leyton Station and support projects shaping a Cultural Quarter throughout Walthamstow Town Centre. This could be a significant factor contributing to the remarkable resilience in growth observed in the Waltham Forest area, defying prevailing market sentiments indicating an overall decline in house prices.
Considering the above analysis, Waltham Forest stands out as one of the favourable areas for investment within North East London, given its ongoing transformation and growth. This reinforces the overall appeal and investability of North East London compared to other regions in London.
North West London
In North West London, an intriguing trend unfolds as house prices surpass those in North London, as well as presenting a notable contrast to the affordability observed in North East London. The prevalence of flat sales remains consistent, with Camden emerging as the most expensive area and Harrow claiming the title of the most affordable.
Delving into the flat prices, Camden showcases a higher price point at £716,206, in contrast to the more affordable flats in Harrow at £344,571. Same as North East London, Camden flat prices are above the £500,000 affordability limit, thus we will focus more in the area of Harrow.
Examining the trends, Harrow experienced a 3% increase from last year and stands out with remarkable growth from 2020, experiencing an impressive 16% increase in house prices.
In a landmark announcement in July 2021, Harrow Council’s Cabinet unveiled a £690 million regeneration program in collaboration with Wates Residential, charting a ‘new and exciting’ future for Harrow. This ambitious initiative aims to bring forth 1,500 high-quality affordable homes, a new civic centre, commercial spaces, and vibrant green public areas for the residents of Harrow to enjoy. The substantial scale of this regeneration project could be a pivotal factor contributing to Harrow’s sustained growth, even amid the backdrop of declining house prices in other London neighbourhoods.
Harrow emerges as a key driver for growth in North West London, further emphasising the investment potential of this region.
To sum up, when considering investments in UK properties, particularly in London, areas exhibiting resilient growth often align with extensive regeneration initiatives. These plans not only generate employment opportunities but also stimulate heightened demand for housing, consequently fostering price growth.
In addition, it’s crucial for these properties to adhere to the affordability anti fragile factor, ensuring accessibility to local residents. This not only intensifies demand but also secures a viable exit strategy for potential future property sales.
Based on the above analysis, Waltham Forest in North East London and Harrow in North West London stand out as potential investment hotspots. For investors exploring opportunities in UK properties, these areas present compelling prospects for your next investment project. Delve deeper into the intricacies of the UK investment landscape by joining our I Quadrant community, where a wealth of additional insights and knowledge awaits.