London Real Estate Market Loses its Appeal: Investors Flocking to the North

The London real estate market has long been a sought-after destination for investors. However, recent reports have shown that the real estate market in London is losing its appeal to investors, and they are now turning to more promising regional areas such as the north-west of England.

This change in investor interest can be attributed to the slowing growth in the London housing market and higher interest rates. According to a report by the property broker, Hamptons International, the percentage of new homes sold while still on paper in London fell to 44% last year from a peak of 71% in 2016. This decline is because investors are looking for more potential land outside London, with the north-west of England emerging as a promising area.

Furthermore, the report indicates that the housing market across the UK is faltering due to the rising interest rates and the cost of living crisis. The end of the era of cheap money means that the period of property growth in the UK may be over, and investors are seeking cheaper locations that offer higher yields.

In contrast to London's slump, areas such as Birmingham, Brighton, and Manchester are experiencing high demand for unfinished homes. The Hamptons report shows that a record 50% of new homes were sold before completion in such areas where the average buy-to-let yield exceeded 10% last year. This is a significant blow to the London property market, which offers the lowest average returns in the UK.

The decline in purchases before project completion can also have a severe impact on the construction industry and project owners. Presale money is often used to help pay off the borrowed funds used to build the project, and a decline can lead to difficulties in paying debts. As interest rates soar, developers will likely have to slow down project construction to avoid expensive debt payments.

This shift in investor interest from London to the north of England shows that the property market is always changing and investors need to be adaptive. While London has long been viewed as a safe investment, the increasing interest rates and a slowing housing market have made investors look to other regions. As the north-west of England and other regional areas emerge, it may represent the next promising investment opportunity for those looking to invest in the UK's property market.