53: Reasons for UK property investing - London
12-10-2005
PropertyInvesting.net
PropertyInvesting.net would like to share with their customers some key reason why property prices would rise or fall in London. There are three tabulations:
- General reasons : macro-economic and socio-economic factors affecting house prices
- Local reasons : infra-structure, local change and positive developments
- Reasons why prices might fall : key risk areas which might lead to price falls
We hope these tabulations help your to determine whether you believe prices will rise, stagnate or fall in London and proximal areas, in the next few years.
| General Reasons | Importance of reason |
| Unemployment is decreasing - below 1mill in UK now | 9 |
| Interest rates staying low (topped out at 4.75% in mid 2005, now 4.5%) | 10 |
| Problems commuting - more 1 bed flats required for weekday pads | 5 |
| More single parent families | 6 |
| More divorces - less people living in each property | 4 |
| Affordability of housing remains low | 8 |
| Urban re-generation and trendiness of living in city increasing | 7 |
| Inflation under check with increased productivity and Euroconvergence | 8 |
| Pressure on land - slow planning process and environmental issues | 7 |
| Not enough houses being built (1 mill needed, 0.4 mill planned) | 8 |
| London population rising steadily since late 1980s | 8 |
| Immigation to London increasing - as locals get older and some move out (shortage of labour) | 6 |
| London global centre for finance - getting stronger by the year | 7 |
| UK GDP in London higher than UK as a whole - currently 3.5% (instead of 1.8% for UK) | 6 |
| More inheritance wealth being re-invested into property | 6 |
| Lack-lustre stock market performance in recent years | 8 |
| Buy-to-let market strong with strong predicted growth in new 15 years | 8 |
| High capital gains due to high gearing by investors, further stimulating market | 6 |
| Easy access to borrowed money at low, competitive (and fixed) rates | 8 |
| Tax break - stamp duty not paid in re-generating areas and threshold increased | 4 |
| Cheaper and easier cost of transation (slightly more liquidity?) | 3 |
| Global business and tourism centre | 6 |
| UK population still getting over late 80s property shock and realisation of affordability | 6 |
| More retired people wanting small safe base in London | 5 |
| More people owning more than one property - not enough to go around | 6 |
| People living to an older age (but staying active and needing property) | 6 |
| Low yields on from saving, bonds, stock market - driving property investment | 7 |
| Catch-up with countries like Holland where prices ramped up with new low interest rates | 3 |
| Englishmans home is his castle - increase status and aspiration to own property | 7 |
| Property takes place of pension funds (which are slowly being scrapped/underperforming) | 7 |
| Wages going up 2% more (4.5%) than inflation (2.5%) - forecast to project to 2020 | 7 |
| Housing fundamentals imply increase of 1.3% over wage increase = 5.8% per year | 7 |
| Inefficient building businesses - development dictated by land supply (not quality, innovation) | 6 |
| Property desired prestige/status symbol - end of goods material age | 6 |
| Lack of other investment opportunities (stocks, bonds, savings) | 8 |
| Fears over pensions - using property as pension investment | 7 |
| Local Reasons | Importance of reason |
| Supply/demand imbalance from lack of building (only half required housing) | 10 |
| Last area of high unemployment being swept away | 9 |
| 40000 new jobs in Isle of Dogs 2002-2004 | 9 |
| New Channel Tunnel rail link though East London post 2007 | 6 |
| Regeneration from Jubilee Line Extension from 2000 | 7 |
| Regeneration from East London Line Extension post 2007 | 8 |
| Affordability high because of cheap property | 9 |
| Dockland Light Railway arrived 2000 | 9 |
| London Olympic bid for 2012 (Stratford) | 4 |
| Labour and Livingstone affect stimulating re-generation of inner city | 5 |
| Increase in investment in infra-structure - hospitals, rail, metro | 4 |
| Proximity to City and Docklands professional jobs | 7 |
| More students being bought flats for college by parents (Goldsmiths and Lewisham College) | 3 |
| No stamp duty in low priced area such as Deptford/Lewisham/New Cross (1 bed flats) | 4 |
| Shortage of new homes with brownfield land running out | 7 |
| Big increase in government public spending and key worker requirement | 6 |
| Services, IT and financial growth in East London | 5 |
| More immigration and lower end services jobs in City and Docklands and public sector | 6 |
| Stamp duty break in deprived areas | 7 |
| Incentives for developing and renting to councils | 5 |
| Eastern European (May 2004) opens up to workers in London - increasing rents | 7 |
| Population of UK due to rise to 65 mill (from 60 mill) by 2025 - mainly immigration into SE UK | 8 |
| Reasons Why Prices Could Drop | Importance of reason |
| Higher localised crime (city crime wave, riots) | 9 |
| Buy-to-let market severely saturated leading to investors selling up | 9 |
| Inflation gets out of control (oil price, generally, pound crashes) leading to higher interest rates | 9 |
| Developments all get cancelled (not likely) | 6 |
| Unemployment dramatically increases (not very likely) | 6 |
| Building of huge amounts of affordable housing (very unlikely) | 8 |
| Media hype about a crash (self fulfilling prophesy) | 7 |
| War in Iraq (and terrorism) | 8 |
| Bird flu | 6 |