Then and now: what investors can learn from London’s housing market

If you’d have bought a property in London back in 1998, you might have expected to stump up an average £115,000. Fast-forward 20 years and that same property could have made gains of 319%…

Property investors who buy in the right place at the right time logically stand to make the best gains, and London has long since been the go-to market for those looking to make massive capital increases. Stories of buyers doubling their money, or more, after buying on the crux of an upswing are common, with the average home in London now worth around £482,000 – which is down from its July 2017 peak value of £490,000.

According to the Office for National Statistic (ONS), an average London home 20 years ago cost £115,000 – while 10 years ago, in 2008, it was £351,000.

Capital appreciation

Analysis by Service Octopus, looking at Zoopla’s average property prices against their historic listings across the capital, revealed the different levels of house price growth in London following the tube map over the past 10 years, which sheds some light on what an investor might have made by now if they’d invested a decade ago. For example, if you’d bought a typical £200,000 property near King’s Cross station in 2007, it would probably now be worth more than £300,000, as the average increase in that area was 51% – and that’s after the dip that was seen post-financial crisis.

As prices now begin to level off in the capital – and even contract, as has been seen over the last few months – those investors and buy-to-let landlords, as well as homeowners, who invested in London before or during the boom, will be looking for the next big place to make the best gains as their portfolios mature.

Predicting property fluctuations is never easy, especially as the political and economic landscape in the UK remains uncertain, but it seems clear that the shift is moving increasingly towards places such as Manchester, Liverpool, Birmingham and Nottingham in terms of where to make the most investment gains.

Maximising returns

Savills estate agents, for example, expects the north-west to see house prices grow by an average of 18.1% between now and 2022, the highest region in the country.

The average property price in Greater Manchester now, according to Rightmove, is £188,395, meaning that a buyer who snapped up a property at this price could sell it for £223,000 in five years’ time based on this estimate, although there are obviously a multitude of other factors to consider that will affect price rises, including specific location and property type. Manchester saw price rises increase by 12.7% in the year to November 2017, so the city seems set for record gains in the years ahead.

The lesson investors can learn by looking at London’s property market history is how vital it is to stay ahead of the market and invest at the optimum time in the next up and coming location in order to make the biggest gains. While it’s not possible to accurately foresee the future, most experts’ predictions are pointing towards a booming north.

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