Strange though it may seem, some of the most expensive areas to buy property in the UK are some of the worst places to invest. So too are some of the cheapest places to buy when the supply of available properties outweighs demand.
Living in some parts of the UK, you would be forgiven for thinking recovery? What recovery? Anyone who has invested in properties in some parts of the UK in the last 12 months may be facing the prospect of their investment being worth less than it was a year ago.
While the headline figures talk of recovery in the housing market, property price growth has cooled in recent months and this has made matters worse for areas still trying to make ground following the property crash and also parts of London where prices have reached a ceiling.
House Prices Fall 7%
According to the latest survey released by Home.co.uk property prices in the worst performing areas of the UK have plunged by 7% a year. This has put a squeeze on yields for landlords in these areas, which shows no signs of easing.
Negative yields may not be such a problem for investors in upmarket areas of central London, but in regions like the North East, investors can find themselves with assets worth less than they paid for them and relying on rental returns to generate a profit.
Landlords in prime central boroughs have seen a slump in fortunes as demand for properties has fallen. Black spots include Belgravia where annual house prices have fallen by 7.6% according to Hometrack.
Soho, another expensive area of the capital, has seen prices fall 6.8% with rental yields -3.5%. Westminster prices have also fallen 5.2% in the last 12 months.
Owning property in London does however virtually guarantee a return on investment in the long term for those investors able to buy in prime areas. Those owning property elsewhere in the country may also see prices increase in the long term, but with a high degree of uncertainty as to when this is likely to be.
Tide Turns For Seaside Towns
Even seaside towns, which tend to be popular among retirees have seen a cool off in prices. Poole and Dorset, two areas containing some of the most expensive seaside property have seen prices fall by 7.1%.
It is in the North East of the country where prices have failed to recover from the last property crash. Newcastle upon Tyne, South Shields, Gateshead, Middlesbrough, North Shields, Hartlepool and Stockton on Tees all feature as blackspots for buy to let investment unless investors take the long view.
Hartlepool has seen prices fall a further 7.5% in the last 12 months with little sign of light at the end of the tunnel. Hartlepool is one of a number of North East towns which is yet to see demand outweigh supply for housing.
Home.co.uk director Doug Shephard commented “Price falls in the super-rich suburbs of central London have come about for very different reasons to the falls observed in the North. Prices soared in central London post- financial crisis as foreign investors sought safe haven investments. Such was the demand for this type of premium property that prices overheated, reaching a peak last year, and are now in the throes of the painful process of market correction.
“By contrast, Hartlepool home prices fell hard following the financial crisis and price recovery has been elusive. In fact, price erosion continues in many such locations where supply seemingly continues to outweigh demand.”
Posted on: October 29, 2014