The level of deficit and rising prices for real estate in London

The real estate market of the capital of England has always been distinguished by stability, evidenced by a stable annual growth rates even during the general stagnation in the world market, which occurred in the 2009-2012 year and when property in London costed about 5 times higher than property in general throughout the country and generating around 7% of profit annually. That’s one of the most crucial parameters investors evaluate before investing money in this or that project.

Analysts understood why the value of real estate residential sector in the capital does not depend on the fluctuations of government securities, stocks, gold, etc. They concluded that in stable condition market the balance between demand and shortage of supply is maintained. In particular, Countrywide has announced the results of their research,  where it was obvious that the demand and competition is increasing, while the number of available housing facilities is steadily declining – in 2014 one property was the target of 9.7 customers, while in 2012, these figures were much lower – 8.5 buyers per unit, and 7,1 buyers in 2010.

In the context of investment deficit it is definitely not a negative phenomenon, since it serves as a guarantee that the property will always maintain a high level of competitiveness because of its exclusivity. So if by now the size of the deficit of housing units is about 30%, the shortage of luxury housing, located to closer to the city center, is estimated at about 37%, not to mention the auxiliary expenses, such as legal services coverage – using conveyance solicitors to close the deal is absolutely required.

Accordingly, the elite real estate in London is rapidly growing in its value: in 2014, the increase in the price ranged from 10 to 14% (depending on the area). A similar trend is observed as for increasing rent: many tenants, according to data from The Telegraph, are ready to pay from £24,000 to £45,000 for rent, located in the center.

That deficit has provoked strong demand for luxury property, the most favorable opportunity for investment, because of lower risks and a high potential for maximum yield. Real estate in London will continue to go up in price – a conclusion reached by the experts Knight Frank independent agency. Their predictions have affected the period from 2015 to 2018. The total amount of the price increase is 35.8%, with the most intense price growth will occur in the period from 2016 to 2017 (by 4.3%). Analysts explain this trend by the fact that the lack of living space will not be able to eliminate up to 2020, since at the moment there is a lack of facilities in the amount of 50 thousand houses. Thus, the main groups of investors of the past decade (Arab, CIS and Chinese investors), who acquired real estate in London, have all the chances to repulse spent capital and bail out on net profit through resale transactions.