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The deceptive nature of London property prices – Rozario

by: Andrea Rozario, chief corporate officer, Bower Retirement Services
  • 08/04/2016
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The deceptive nature of London property prices – Rozario
For a small but yet significant minority, playing the housing market has proved very profitable. Andrea Rozario explains how this could be a boon for potential equity release customers.

Every single year, more than 7,000 homes worth £1m or more are being purchased without mortgages, according to research from Bower Private Clients – the new high-net-worth advisory arm of Bower Retirement.

Nearly two-thirds of these £1m-plus property buys were completed in London, and over the past five years there has been a staggering 110,000 £1m-plus properties bought across England and Wales, equating to £192.7bn spent. But appearances can be deceiving.

Many of the purchases in London have come from rich sheikhs and oligarchs, and much of the city’s most expensive areas are now dominated by foreign interests. This influx of foreign money into the capital’s property market has facilitated some huge increases in the property prices right across London.

In 1995, £70,000 would buy you the average home in London; but 10 years on, you would need around £240,000 to purchase the same home; and by 2015, this had jumped to a massive £435,000.

Of course, these figures are not adjusted for inflation, but they represent a tidy profit for those homeowners who have stayed put in their London property. However, for most people, London remains an extremely expensive city to live in. Time and again customers looking into equity release who live in the capital have lived in the same property for many years. Yes, their home may be worth what most of us consider to be a lot of money, but far too many have very little income. Living in some of the UK’s most desirable areas, many of these homeowners have minimal cash at their disposal – they are the archetypal asset rich, cash poor client.

It’s unsurprising, therefore, that more and more homeowners are looking to access their property wealth via equity release, and those in London are securing the equivalent of 130 weeks’ pay when they take the drawdown option and a massive 373 weeks’ pay when they take a lump sum.

Equity release products can help banish financial stress from retirement while ensuring customers don’t have to move, and for those who have lived in London for decades and don’t want to move anywhere else, the lifetime mortgage can sometimes be the only way they can afford to continue their life in the capital.

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