IP Global Limited

London and New York Investment Review

Blog post   •   Nov 01, 2010 06:28 GMT


London is the world’s leading financial and trading hub, home to 65% of Fortune’s Global 500 companies. London remains the preferred investment destination for investors seeking out markets providing stability, established property laws and mortgage financing. Current market conditions in London have created a favourable environment for property investment. Severe undersupply coupled with low interest rates and weak pound exchange rate make it the ideal time to invest in prime London property.

Over the last 12 months property prices have increased by 11.4% marking the 11th consecutive month of positive price growth and the strongest annual growth experienced by any other region in UK and Wales. From July to August prices increased by 0.9% indicating strong and stable price growth. Although prices have increased substantially over the last 12 months, there is room for growth with prices still lower than their 2008 peak.  The latest report from the UK’s land registry has shown that Brent was the borough with the highest annual price rise, recording an increase of 16.3%. The borough of Redbridge experienced the highest monthly price increase, with a rise of 1.7%. Bexley experienced the smallest annual price rise of 5.5%.The borough of Islington also performed well registering an annual 12.4% increase in house prices and a 0.2% increase from July to August 2010.[1]

Over the last quarter stock levels in London have fallen by 15% marking the lowest level of supply since July 2008. As a result of the severely under supply, rents in London increased at the highest rate of any region, recording a 5.1% rise between June and September 2010. Over the last 12 months, rental prices in London have increased by £208pcm to £1,818pcm or an increase of 12.9%. Rental prices are now the highest since the index was started in January 2008. [2]

The UK's largest letting company also noticed the supply shortage registering 50,480 prospective tenants during April, May and June 2010. This is the highest level that has been recorded since they started collecting data in 2003. As a result there are now an average 5.5 tenants competing for every property. This news may be very beneficial to investors with analysts revealing that people would prefer to purchase a home than rent in 74% of locations around the UK. This indicates that investors should see strong capital growth and health returns on their capital invested.[3]

Oxford Economics, a leading forecast consultancy, have predicted that London’s GDP will grow by 3.8% (inner London 4.2%) per annum between 2010 and 2012, compared with 3.0% for the UK. This strong GDP growth indicates that the property market will continue on its upward cycle over the long term.[4]
Key to the UK market is the interest rate remaining extremely low; this bodes very well for the property market. I don’t see a particularly steep recovery but there are great deals to be had because developers are still desperate to offer stock to overseas investors. I think that with low interest rates and high rental yields the UK will still offer strong value over the next 12 to 18 months.

New York

Property prices in New York gradually increased by 197% from May 1991 to June 2006. Prices subsequently fell during the global financial crises by 20% from January 2007 to April 2010. However from April to July the property market begun to recover with prices increasing by 3.5%.[5]

According to research conducted by Trulia, a real estate research engine, the median sales price from homes in New York from July to September 2010 was $1,125,000. This represents an increase of 8.3% or $86,000 when compared to Q2 2010. The average price per square foot has consequently increased by a year on year 1.9%, making it $1,189. This indicates that New York is a prime market for investment with stable and steady price growth expected over the long term.[6]

Foreclosures in New York are some of the lowest in the US with just 1 in every 2175 housing units receiving a foreclosure filing in September 2010.  This is considerably lower than the US average of 1 in every 381 housing unit receiving a foreclosure filing. This illustrates that as a global financial hub, the New York economy and property market are more robust and thus bounced back quicker than other markets in the US.[7]

According to the latest rental market report on Manhattan, rents in from August to September 2010 increased by 0.2% representing a 4.84% year on year increase. The condominium (condo) market performed well during Q3 2010 as the length condo’s where listed on the market fell from an average 134 days in Q2 2010 to 106 days in Q3 2010. This is as a result of median sales price of a Manhattan condo which increased by a year on year 10.3% and by 1.8%  from Q2 2010, to $1,120,000.[8]

Recent reports from Trulia, has shown that New York City ranked first as being cheaper to rent than to own, however over the last few months rents have started on an upward trend indicating that this rank might change in the near future. New York has seen positive house price growth of 12.4% from Q3 2009 to Q3 2010 according to Prudential Douglas Elliman Real Estate, New York’s largest real estate service company.[9]

The outlook for New York is extremely positive with increased mortgage availability and positive growth trends expected to translate into strong rental yields and solid returns on investment.

Find out more about investment opportunities in London and New York.

Kind Regards
Tim Murphy