Selecting a reliable partner for co-investing in London’s development opportunities is important
London, the financial capital of Europe, is going through one of its most challenging times from the property market perspective.
While the demand for housing is growing significantly, there is a greater imbalance in the demand and the supply sides. This scenario makes it an ideal situation for international investors to take a bet on the London property market, as it promises high returns and value creation in the long process. A number of international investors are showing interest in investing in the London property market and preferably they should opt for co-investment opportunities by partnering with established firms instead of foraying directly.
The city of London and its surroundings offer immense potential for investment in the property market. The current population of 8.5 million is forecast to grow to 9.4 million by 2022, and 10 million by 2029. The average annual supply of houses over the next few years is forecast at 33,400 units. But the average annual supply in London since 1980 is 16,000 units a year. In 2014, about 28,800 new homes were built as against the Mayor’s target of 42,000 while the demand stood at 52,400 units!
London’s steady population growth is outpacing the growth in housing, making it an ideal for investments. The supply & demand imbalance is high while the average long-term rate of house price growth is 10% per annum. As many as 976,820 new homes are needed in next 20 years and the new homes deficit is 476,820.
In recent years, there have been significant moves towards greater devolution of housing and regeneration functions from the Central Government to both the Mayor and London boroughs. A lack of financial autonomy seriously undermines the efforts to make the long-term plans that London’s housing providers need. As a consequence, scope for private developers to actively take part in the regeneration projects has increased by a huge quantum.
Several well-known and reputed property companies have already announced their schemes in the regeneration projects. International investors have to identify such companies for safe and secure investments in the London property market.
Teaming up with established players would have the benefit of saving time, money and ultimately benefitting investors with a higher rate of return, as such companies have expert teams in London and would be able to source, build and deliver the development resulting in sharing the profits. In addition, full-fledged property companies offering end-to-end services would also sell downstream to the retail buyers and also conclude re-sales. Essentially, it means investors have to find the right partner to invest their trust and funds.