How Far is That From London?

When advising overseas clients on the strongest opportunities, the UK property market has to offer, a common question I am frustratingly faced with is "How far is that from London", which is often followed by "What do you have in London".

City of London

No matter how exciting and rewarding an opportunity is in the north, investors continue to be drawn to the capital and the prospect of owning a property in one of the greatest cities in the world.

According to Hometrack, last year average rental yields in London were just 3% compared to the national average of 4.5% and the northern average of 5.1%.

So why are international investors prepared to pay more and earn less, buying in the capital?

I put this question to one of my Saudi based investors and the answer was logical and surprisingly simple:

"I know London, my friends know London, my family know London. London offers a high standard of living and is home to aspiring individuals. I feel safe knowing my property will always be rented and that the value of my property will increase over time. I have properties all over the world, as do many of my friends. But not everyone can invest in London."

This response by Abdullah was insightful and although I have shortened his full response, it confirms what I suspected.

Bare in mind Abdullah has only ever visited London twice in his life, it was clear that he feels a greater degree of security investing in a familiar location, one he regularly heard about, whether good or bad. In addition to this, Abdullah felt investing in London was something to be proud that gained him prestige amongst his peers.

To me this reveals two things. Firstly, despite the challenging times faced by London's economy and property market, investors are still prepared to invest in the city, even if it means taking a hit on their returns.

Secondly, if you are introducing a new town or city to an international investor, you had better be prepared with more than just facts and figures. Clients need a full picture to be painted so that they can make a well-informed decision on whether this particular town/city is going to achieve their investment goals.

After-all, we buy property to make money, as much money as possible. If you neglect to consider the scope for growth and high yields in the north, your pocket will take a hit.