The average return on London-based investment properties sold last year came in at a whopping £250,040. With the average cost of a residential property outside of the capital now £202,900, compared to £471,960 in London, that means that those selling up would have been able to buy a new investment property elsewhere in the UK with just the profit. And be left with almost £50,000 in change.
London properties are, on average, sold on after ten years of ownership. That means 2019 profit figures on investment property sales were boosted by the fact that in 2009 prices were relatively low following the international financial crisis. The strong market rebound over the years after prices were depressed following 2007 peaks gave an especial boost to London property investors, where the recovery took hold quickest.
Before stuttering over the last couple of years, average London property prices soared from around £247,000 in March 2009 to a peak of over £488,000 in July 2017. As of the end of 2019, the average price in the London region was around £484,000. London prices have increased by 83% over the last 10 years. The average profit on a London residential sale in 2018 was still an impressive £237,190.
Source: Land Registry
Of course, not only those selling London investment properties have benefitted from the strong price rises over the past decade. Tenants who decided to move out of London after selling their capital property have also done well. The Times reports that around 73,000 of those that sold their homes in London last year used the returns banked to leave the city. 32% moved out to areas surrounding London and another 31% remained in the south east.
Prices in those regions are still high, though lower than in London, which means that buyers would have been able to upgrade to a larger property or one in a better area for the same money, or pocket the difference. The remaining 37%, who moved further afield, would have benefitted even more by buying in cheaper regions of the UK.
So how much more do former London residents, or property investors, get for their money outside of the capital? Analysis by Hamptons International and LonRes estate agencies shows that anyone selling a home in London for the average price of £471,950 (the price differs from that given from the Land Registry for London, presumably due to a slight discrepancy of the regions that are classed as ‘London’), would benefit from an additional 953 sq ft of floor space by moving into the countryside. A move to a town or suburb within commuting distance of London would add an average of 868 sq ft of space.
Unfortunately, the current generation of London residential property owners are unlikely to make the same kind of gains as the 2009 cohort. With London property prices relatively stable over the past couple of years and prices rising strongly elsewhere, the value gap between the capital and many other parts of the UK is closing.