Monday, May 27, 2024

Is London Still the UK Property Market’s Golden Goose?

London’s property scene is like no other in the UK. Investors spend huge sums of cash on flats barely bigger than a postage stamp because property in the capital brings in a premium rental figure.

But times are changing.

Renters are tired of cramped and uninspiring living conditions. They want space, they want a garden, and most of all, they want value for money. People are moving out of London to find homes that better suit their needs.

On top of that, London is no longer the only UK city where the young and ambitious can seek their fortune. With world-class universities in the North West and a chance to work for one of the many FTSE 100 companies based up North, the capital doesn’t hold the same allure that it once had.

Some might even say areas such as Liverpool and Manchester have usurped London’s position as the Golden Goose for investors thanks to the population boom and greater demand for more suitable property.

As digital marketing experts in the property sector, Strawberry Forge has worked with investors, brokers and landlords across the country, and we’ve noticed a monumental shift in the perception of London’s perceived value.

But don’t take our word for it; the numbers speak for themselves.

Rental ROI

Did you know London smashed its own record recently? In August 2021, the average cost of a residential property reached £525,893, an increase of £27,810 on the previous month according to the Office of National Statistics.

And the average price of rent? That would be £1759 pcm, equal to a 4% rental yield.

4% is an okay return, but it’s not exactly earth-shattering.

Let’s take a look elsewhere in the UK to see how London really measures up.

In Manchester, the average price of a residential property is £246,976, according to the portal Rightmove. That’s already a huge improvement on London.

But of course, it’s the ROI that really matters, as a higher upfront price is worth paying for a better return. So, what can you expect from Manchester?

Well, the average property brings in around £1411 rent pcm, which is a yield of 6.86%.

If you’re looking in terms of pounds, then London does beat Manchester. But, if you look at the percentages, the Northern city beats the capital every time.

Let’s take it a step further, though. Keeping the average prices in mind, you could buy two rental properties in Manchester for the price of one in London, and still have £31,941 left over to cover fees, maintenance and furnishing requirements.

You’d then be taking in £2822 per month as well before associated costs, which is over £1000 more than you would with just one London property.

Capital Growth

Rental income isn’t everything in the world of property; capital growth plays an important part in investments, too. Unfortunately for London, it’s not faring as well as its Northern counterparts in that department either.

COVID-19 affected almost every industry you can think of, and that includes property. The UK is going through it’s biggest price boom in years following the disastrous fallout caused by the pandemic, yet London is lagging behind.

Between September 2020 and September 2021, growth in the North West increased by 16.8%, in the East Midlands the annual change reached 14.7%, and the North East saw a rise of 13.3%.

London’s house price growth only reached 2.8%.

And the low capital growth of London properties has been a continuing trend for years.

In 2016, 2017 and 2018, house prices fell year on year according to Land Registry data. 2019 saw a small rise of 3.3% and continued to grow slowly until April 2020.

Since April that year, prices have only risen and dropped by small percentages. There’s been no significant boom for London investors who are looking to buy or sell that can be taken advantage of.

All we’re seeing in London is very high price tags that don’t result in a healthy ROI, even if you hold onto your investments for the long-term.

Where is the Golden Goose?

As the UK capital, London will always hold value. Despite slow growth and high purchase costs, people still want London properties.

They just don’t want them as much as they used to.

Cities across the UK are closing the gap on London. The North West has swiftly broken into one of the top spots, but areas such as the North East and Wales aren’t far behind either.

At Strawberry Forge, we speak to property experts regularly, and we pay great attention to what they have to say. London is no longer the main choice for investors, and researching the rest of the UK could reveal significantly more lucrative deals giving you a lot more bang for your buck.

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