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Why do property investors tend to focus on London and the South East?

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Longterminvestor

Administrator
I have always wondered why investors tend to focus on London and the South East of England even though there are double digit rental yields available in the North of England? Is everything focused on capital gains?
 
D

diyhelp

Active Member
This is where the majority of jobs and investment are in the UK so demand for properties tends to be at its highest. However, I dont understand why more people dont look further north where there are double digit rental yields available.
 
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nmb

Well-Known Member
True, high yields can mean weak prices or limited capital growth (the yield is effectively compensation for a shortfall somewhere). However, if you are able to secure a 10% rental yield then even with interest you should be able to pay off a property in 10 years + interest term (I appreciate there are running costs, etc but just using this as an example).

Therefore after the property has been paid up (effectively using rental income) then even minimal growth, or a slight fall in value, would see a significant windfall. There is also the opportunity to re-mortgage the property to buy another rental property. A long winding road I appreciate but better than constantly chasing the next capital gain?
 
M

Mandy Thomson

New Member
I invest in Greater London because of the capital value and because that's the market I'm most familiar with, but moreover, Greater London and the South East is where the best tenants are. Finding the right tenant is crucial, no more what sort of property you are renting.

Aside from tenants who aren't ready to buy because they're students or moving around for work, where property prices are low enough to enable a single person on a modest salary to buy, you are going to find that most people who rent are not in steady jobs, and are on low incomes and housing benefit. This means more risk of rent arrears and as such tenants have much fewer housing options, they are harder to evict should that become necessary, especially if they're reliant on the social sector to rehouse them.
 
R

realdeals

Active Member
Hi Mandy,

Thanks for your comments - I am curious as to the rental yields you are able to secure for you housing investments.
 
K

kchiggs

Member
This is a bit more of a UK investor-effect. Birmingham for instance is ranked much higher by international investors than UK ones. Think on the level of Wellington, NZ
 
R

realdeals

Active Member
I think there is a lot of potential outside of the capital and the South East which goes untapped. Capital growth potential may not be as great when you look further a field but there is more to property investment that pure capital growth.
 
K

kchiggs

Member
Good point. Perhaps a large portion of non UK investors are less interested in capital growth and more with protecting wealth

I iknow that cost of London property is exorbitant when for s spare 150 they can get a nice 3 bed house and be an hour from Eurostar. Anything on the line to Luton airport is quite popular.
 
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nmb

Well-Known Member
Very interesting point that - checking out local transport links and perceived value for money.
 
K

kchiggs

Member
Very interesting point that - checking out local transport links and perceived value for money.
For some strange reason certain transport routes and locations , seem to be missed. The above exmaple gives you a direct connection to Eurostar terminal with 24/7 service the option to reserve seat and wifi the whole way can travel first class on overground rather than 2 hour on the tube. Yet pricing is far less than places that require a longer commute by tube. I think it is because it is not London and because prices ar eperhaps a bit too much for commuters. If however you just want to be treated well. First class is a boom.
 
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nmb

Well-Known Member
What do you think of the Brexit deal phase 1 announcement? I wonder if the UK will be able to negotiate a role for London within the EU financial markets and potentially reverse the planned exodus to Europe?
 
K

kchiggs

Member
Aside from the protection of citizens rights until sunset clauses and the right to control immigration (not in terms of caps, but residency reauriments anyway its basically the rights the UK had and never enforced anyway plus rollover emergency brake) and the NI deal its all rather wooly language but can't see anyway they can keep.the promises to DUP on NI unless f "regulatory alignment" means joining Norway in e.e.a or going back to e.f.t.a in which case London could keep its role as it would scarcely matter. Of course it preserved the eu red lines so no deal would delay London's loss and provide more time for companies to relocate. Unless the Tories are going to throw the DUP and no deal brexiters under the bus and accept tariffs and hard border in the Irish sea or stay in e e a and e f t a. In which case they won't be able to stop immigration from non eu citizens so would probably have to waive phase 1 right in phase 2 negotiations. I can't see how they .can maintain their role. Although they might be able to serve eu companies in the way they do Canadian South African or Indian ones by channelling investments.
 
D

diyhelp

Active Member
The way things are going at the moment I dont think there are any winners - Brexit should mean Brexit, leaving the EU and going it alone on a trade basis. Everyone forgets that a No Deal means EU trade with the UK (and vice versa) reverts to WTO tariffs for both parties. What a mess!
 
K

kchiggs

Member
Tariffs are not really bad or difficuilt to overcome. The complexity is worse than the cost (esp if you control your own currency) however everyone forgets that covers good but not services. What does UK manuafacture? How dominant is the services sector?
 
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nmb

Well-Known Member
The UK has become a service based economy - car manufacuring effectively gone, coal mining dead, lots of food /food products imported, etc. If London was frozen out of the EU financial sector this would be a massive blow. EU members such as France and Germany have been trying to grab London's financial business for many years - now they have their chance to pounce!
 
K

kchiggs

Member
Agree German exporters will be hurt by tarrifs on exports but 80% of UK economy could just go since hard brexit means can't trade services any more. I think Frankfurt is beginning to punch out over france although Vilnius has been a surprise contender. I'd of expected Dublin to do better and maybe lille (easy to bring people to the office in London once a week.) Hard brexit buy eurostar.
 
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nmb

Well-Known Member
Juist read today that the EU is saying London (the financial sector) will not be discussed when trade talks begin. Seems fair to me but how come the EU is dictating all subjects up for discussion? The UK government seems to be dumbing down as it goes for a soft Brexit but I think the EU will push and push and push until the UK is forced into a corner where it is dictated to by the EU during the transition period and will not be able to do deals with overseas partners. Then you need to ask yourself, what was the point of Brexit?
 
K

kchiggs

Member
The EU is dictating terms because
A) they had a clear position
B) a strategy to achieve it
C) the UK had no real strategy. Even the ardent leavers had no real plan.
D) It's becoming abundantly clear that the eu held all the cards esp as UK wants to carry on exporting its services.
The transition period of course depends on how soft the brexit deal ends up. If its Norway style then nothing to stop overseas trading partners and that (albeit with a hard border in the Irish sea) has been on the cards since day 1.
As to what was the point who knows. Maybe it's enough to please people on sovereignty issues if the UK becomes like the channel islands or isle of man to eu. Technically independent but copy everything so much the only real difference is the stamps and currency.
 
L

Longterminvestor

Administrator
Surely you could argue that the UK has never really been a fully compliant member of the EU - the UK did not accept the Euro and even if membership had been retained this was never really on the cards?
 
K

kchiggs

Member
As compliant as Poland or Denmark. The EU would never agree or suggest UK has been non compliant. Greece has, so the UK could argue that since it has been compliant and others have not and yet not been ejected, it should renegotiate its arrangement. Or that it can't be compliant with the perceived upcoming changes (e.g. the euro, it is not an official eu currency.. yet Or ever closer union) that's not the same thing though.
 
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