Almost half of private rented sector (PRS) property investors are considering adding more London assets to their portfolio in the next year, according to a recent report.
London comes out on top in capital value outlook, investment appetite and future income expectation, says the latest Young Group Index.
Some 46 per cent of PRS investors are weighing up the possibility of buying more assets in London in the next 12 months. Assets in the capital are more appealing to investors than those elsewhere in the UK, although investment remains desirable on the whole.
Financial reasons were most commonly cited by those investors not looking to London. But when asked about investing outside of the capital, investors expressed concerns about capital value prospects and future tenant demand.
Commenting on the report, National Landlords Association policy manager Chris Norris said: “The prospects for investment in London and the South East have remained very strong, despite the economic downturn of the last few years.
“Unlike much of the UK, house prices in London particularly have fared relatively well, with some areas continuing to appreciate strongly.”
London’s capital growth and rental income is higher than the rest of the UK, respondents to the survey said.
The vast majority (85 per cent) of investors believe properties in London will gain in value over the next 12 months, compared to 41 per cent in the rest of the UK.
Property prices in London are expected to rise by an average of 2.2 per cent by the first quarter of next year, while investors believe values elsewhere in the UK will drop by an average of 0.4 per cent in the same time.
Average rents in the capital are forecast to go up 3.25 per cent in the next year, while expectations in the rest of the UK are for a rise of 0.7 per cent.
Norris believes a number of landlords are being held back by difficulties accessing finance.
He said: “Although it is reassuring to see lenders returning to the marketplace, we are still a long way from the kind of runaway growth in lending witnessed prior to the credit crunch. Many landlords are still finding it very difficult to access affordable finance and average loan-to-values (LTVs) are much lower than their pre-2008 rates.
“The increase in LTVs currently taking place is a positive step for the market because it makes increasing supply of homes possible. However, it should be viewed in context. The highest mainstream LTV a landlord is likely to find in the market today is around 75 per cent. In most cases this will represent a sensible and sustainable level of finance.”