London's luxury property market slowdown appeals to ‘savvy’ investors

The slowdown in prime central London’s residential property market caused by overinflated house prices, higher taxes, increasing housing supply, weaker demand as well greater political and economic uncertainty surrounding Brexit, is creating fresh opportunities for ‘savvy’ investors seeking ‘good value deals’ before the market improves once more, according to a leading property investor.

Home prices at the top end of London’s market have faltered in recent months, with fresh analysis of Land Registry data suggesting that properties in one prime central London borough lost £3,000 a day in value in the last month.

Figures published by London Central Portfolio (LCP) last week showed sales of homes worth more than £10m fell 86% in the three months to August compared to the corresponding period last year, but this is merely creating new investment opportunities for those canny investors currently looking to invest in the capital’s luxury housing market, says Naomi Heaton, CEO of LCP.

Heaton commented: “On the back of the political uncertainty caused by the UK election, the EU referendum and the introduction of swingeing residential taxes, the double digit growth seen in PCL [prime central London] since the credit crunch had tapered off by early 2015. Just as in 2009, this cooling off represents an excellent opportunity for the savvy investor to secure good value deals before the market picks up again.”

What’s more, LCP reports that the recent devaluation of sterling has prompting renewed appetite from foreign investors seeking to invest in prime central London’s property market, which has prompted LCP to announce the launch of a new residential property fund.

London Central Apartments IV will replicate the model of LCP’s previous three funds, investing in the mainstream PRS in prime central London. For the first time, however, this new fund will offer income and capital return options for shareholders, to meet investor demand for distributions in a low interest rate environment.

Heaton continued: “Demonstrating a loose parallel to the global financial crisis, weak sterling and low interest rates will once again be a major draw for investors.

“Indeed, with most equity markets trading strongly, investors are generally in a much stronger position than in 2009, so we anticipate a high level of appetite for our new fund.

“Over the last couple of weeks, we have seen interest pick up substantially and despite the fact that we have not been marketing a fund, the number of investment enquiries has increased more than 10-fold, one of the factors prompting our decision to launch a new vehicle.”

LCA IV will target returns in excess of 10% per annum over a 5-year period by cherry-picking properties with added value potential across all the prime postcodes. These will undergo a full refurbishment and interior design programme to appeal to the mainstream rental sector.

The minimum investment is from £25,000 upwards, subject to eligibility.