In 2022, a particularly noticeable decrease in demand for luxury real estate in London, writes the Financial Times. Market participants note that the decline has been observed over the past 5 years. In particular, the real estate agency Savills recorded a decrease in the value of elite residential real estate objects by 17.6% compared to 2014. Experts see several reasons for the decline:
- The record growth of inflation and the increase of the key rate, which led to an increase in the cost of loans and an increase in construction costs;
- Brexit also had a negative impact on the real estate market, because the offices of all European agencies and banks moved from London;
- The market did not have time to recover from the consequences of the Covid-19 pandemic.
The main buyers of luxury real estate in Britain were businessmen from China and the Middle East, says Andrew Langton, who heads the Aylesford International agency. He notes that the number of foreign investors decreased even during the coronavirus pandemic. Wealthy Britons took advantage of the drop in premium housing prices, investing $5.75 million in it. But this did not have a serious impact on the market, so investors are looking for other areas to preserve and multiply assets
Where To Invest: 3 Types Of Profitable Real Estate
The British real estate market is considered one of the most reliable in the world. After all, this is a country with a stable economy, a reliable political system and a strong national currency. The crisis in the luxury real estate market forces us to look for more promising areas for investments. The founder of the company Imperium Investments, financier and investor Dmitry Leus advises to pay attention to the following types of projects:
- Inexpensive real estate, worth up to 350 thousand pounds;
- Construction of small apartment buildings;
- Warehouses and other logistics facilities.
Despite the decrease in demand for premium housing, middle-class apartments remain profitable for investments. Dmitry Leus advises to focus on affordable apartments that average English people can afford. The owner of such a home can protect his savings from inflation and earn 5-8% on rent. The second type of promising investment is the construction of small apartment buildings. These projects are designed for one or more participants. Investors can get up to 25% return on the sale of housing.
Warehouses and logistics hubs are considered the most promising area for investments. The greatest demand for logistics facilities was observed during the quarantine period. At that time, Internet trade and delivery were actively developing, so retailers felt a lack of well-equipped warehouses. Dmitry Leus also believes that warehouses are one of the most promising directions for investment. He explains this by the fact that online trade will develop, regardless of political or geopolitical factors.
Oliver Kolodseike, head of economic research at Colliers, confirms that logistics facilities will become the most efficient asset class for the next 5 years. This is stated in the Colliers quarterly report “Forecasts of investment in real estate in Britain for 2022”. The economist draws attention to retail warehouses as the most promising, and also notes the stable growth of rents in the industrial sector. Oliver Kolodseike claims that 2022 will be a successful year for most investors and predicts a 12% increase in total real estate returns.