2011 looks like a year of low capital gain for property investment (albeit against rising rental returns) in the light of this, investors will sometimes amend their investment strategies and only do property investment in London. Is this the right thing to do?
Historically, after any dip in property prices London property prices are always the first to recover and doing property investment in London looks appealing.
This is then closely followed by the commuter towns and cities such as Milton Keynes, St Albans, etc.
Following the credit crunch, the London property market once again enjoyed a quicker rebound.
This graph clearly illustrates how the London market has recovered at a quicker rate compared to the rest of the UK since the property market bottomed in early 2009, does that suggest we should all be doing property investment in London?
So in answer to the question should we only be doing property investment in London right now?
The answer is NO; I repeat, you should not buy solely be doing property investment in London market right now.
So why is this? You can’t argue that London is recovering at a quicker rate than the rest of the UK but this is a very short term view. Property investment is not about getting rich quick, it is about investing for the longer term.
As we move further into the property cycle, property prices elsewhere will start to rise at a quicker rate than London. Therefore the short term gains will be cancelled out in the long term.
In addition to this, as the property market outside of London is not as fluid, the opportunities to acquire below market value property in the North are greater and it will be in those locations that the discounts will be found.
So should you now be only investing outside of London?
Again no, normally the best way to develop a successful property portfolio is to diversify. If you look for areas with good rental fundamentals and buy below market value, then in the long term you will always do well.