It can sometimes feel like the London property bubble will burst at any moment. How can these continual price rises be sustained? What is the capital’s secret? We take a look at the factors that make people want to keep investing.
Safe as houses
London is seen as secure. There may be some fluctuations in London property prices due to changes in legislation, for example buy-to-let landlords are experiencing a stamp duty hike; and a change in tax regulations means that net disposable income may be reduced. But in the grand scheme of things there are no major changes forecast. Our government is stable, the currency probably won’t be devalued, and thankfully natural disasters are few and far between.
This kind of stability attracts money from people all over the world, who live in countries where political and financial turmoil are rife. This foreign investment helps keep the UK economy buoyant and house prices rising.
It’s the economy, stupid
A strong economy adds to this sense of security within the London housing market. And the UK’s economy has been getting stronger and stronger. Unemployment is at it’s lowest rate for over ten years, and at 5.1% it’s one of the lowest in Europe. Plus, interest rates have remained at a historically low rate of 0.5% for seven years.
This coupled with the ongoing shortage of new houses being built in the UK, but particularly in London and the south east, mean that there is a continued pressure on the housing market, pushing the prices upwards.
The Fame Game
Another factor is that everyone knows London. It’s a world centre that many people have visited, either for work or on holiday. And even if they have never visited, they still feel like they’ve been there. They’ve seen Paddington Bear arrive at the train station, they’ve seen 101 Dalmations escape the Big Smoke, and the mysterious Sherlock Holmes and his trusty sidekick discover the murkier corners of the city.
Fortunately, this familiarity doesn’t breed contempt, but creates a feeling of comfort and affection that makes a flat in London feel more emotionally engaging than a high-rise in Bulgaria. Add that to the fact English has become the international language of business and it’s easy to see how finding a property and employing a lawyer can be done more easily here than almost anywhere else.
Timing is everything
London’s time zone is perhaps a surprising element of its success. It makes a London office essential for many large companies, as it’s perfectly located for working with the Far East as well as the US. American employees are usually going to bed just as Chinese workers are getting up. This can make communicating with colleagues difficult, and means something which should take a two-minute phone call to resolve can take a day or two. London’s time zone is slap bang in the middle, which means a London office can liaise with both sides. This makes London property very attractive to overseas companies, who import employees, pushing up demand for good quality accommodation.