London property prices

Citation

(1998), "London property prices", Property Management, Vol. 16 No. 4. https://doi.org/10.1108/pm.1998.11316dab.010

London property prices

London property prices

Despite climbing to record levels, London property prices are still "massively undervalued" when compared with other capital cities and look set to continue their upward path for the next three years, according to Wimbledon and Fulham estate agent Richard Bowden, of Bowden Property Services.

The rise in prices will be fuelled not only by domestic demand but also by foreign investors from traditional markets such as the Far East and, more surprisingly, from Ireland where he says unprecedented high prices have led Irish eyes to look to the London market for attractive investment yields from houses and flats.

Bowden, who already has offices in Wimbledon and Fulham, is shortly to open a new satellite office in Merton Park and plans other openings this year in Earlsfield and Morden. He says he is starting to see a flood of money coming across the Irish Sea from investors wanting to buy property in what they consider to be undervalued and increasingly fashionable areas of south-west London, such as Richmond, Twickenham, Wimbledon and Earlsfield.

The move has led him to enter a marketing initiative with Olivers Estate Agents in Donneybrook, Dublin, under which Bowden Property Services offer London properties through the Dublin agents.

The move has already resulted in what Bowden describes as "a constant stream" of purchasers who are buying property which will be made available to rent in the Wimbledon, Earlsfield, Putney and Fulham areas.

Richard Bowden said: "Prices in Southern Ireland have been driven higher by the buoyant 'Emerald Tiger' economy, but local property investors are reluctant to chase prices upwards and see London as being seriously undervalued in comparison with other capital cities. The return on investment by letting out a house or flat in other capitals is in the region of only 6 per cent, while in many parts of London they can normally realise a return of up to 15 per cent".

He added: "Although the Irish see our market as strong, they believe it is going to get even stronger, which can only lead to price increases in areas which they know well".

The Irish are also confident that London prices have further to go, he said, because they believe the recent strength of the property market has not been owing to cyclical movements but is as a direct result of the 1988 Housing Act which enabled property to be rented much more easily and more profitably.

"The only real danger for the London property market comes from unseen overseas factors such as a downturn in the world economy. If Hong Kong, the Far East and Singapore investors were suddenly to withdraw their money this would affect prices, but I don't think this is going to happen because these investors really understand the property market and are more likely to take a ten-year view of things than be panicked by sudden scares", said Richard Bowden.

Further pressure is likely to be put on prices because of rises in earnings over the past few years and people's increased understanding of how the property market operates.

"People are coming out of university, renting for two years while they find a job and start work and only buying when they want to settle in an area for a few years. When they come to move on, a lot of young people realise they can keep their first home and rent it out while they buy a second home and live there. This process makes the housing market a much safer place for everyone because people are taking a longer-term view of home ownership than they did in the early to mid-1980s", said Richard Bowden.

Richard Bowden said: "When you consider that a couple aged between 20 and 25 can earn £55,000 a year between them, they can afford to spend £180,000 on property. This means they are setting their sights far higher than young couples have traditionally done in the past.

"People also understand the property market much better than they used to. Many young people these days want to buy a second property as an investment because there is such a strong rental market, and this also will lead to increases in prices. In addition, people are not always selling when they move. Because the rental market is strong ­ and likely to remain that way ­ they are letting their first home and buying a second, larger property for themselves."

However, Richard Bowden warned that the property market should not be regarded as a short-term way to make money. "As the 1989-1995 property market recession showed us, prices can go down as well as up. People should take a long-term view of the market over a ten-year period", he said.