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Will London become a playground for the world’s wealthy?

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I don’t think that there’s any real doubt that overseas investment is the root cause of London property prices spiralling continually higher whilst house prices across the rest of the UK suffer. When we’re only talking two or three percent in a year, with what’s going on in other European countries, most existing mortgage holders would probably take that on the chin.

The folk who are genuinely suffering as a result of the overseas investment in the capital, though, is its indigenous population. Earlier in the year, amidst much media hype, was the proposal for residents whose housing benefit did not meet the minimum rent criteria to be uprooted carte blanche to other regions over one hundred miles away to accommodate them in housing that benefit could stretch to.

The worrying factor based on one set of recently released figures is that foreign investment in London is accounting for so many of the new purchases, pushing the prices even higher, that the average house price is continually rising. With owned property becoming more lucrative and scarce and the FSA imposing strict mortgage lending guidelines, landlords are not going to miss out on the opportunity to raise their rent in line with the average house price.

The higher the average cost of a home in the capital, with one report now suggesting the figure has broken the £400k mark, the higher rent will rise and any realistic chance of benefit covering private rental costs gets even more distant.

We’ve already seen evidence of people who want to purchase homes on either an interest only or self employed mortgage basis having to find as much as fifty percent deposit to be even considered; it won’t be long before those in contractual employment will be asked to find similar amounts if the trend continues this way.

In May 2011, the average London home would have set you back a little over £379k; twelve months and eight percent later, the figure now stands at over £409k. Further investigation into these figures shows that one in five new property buyers in London are from abroad, rising to around 40% when the price bracket reaches £5M+.

We may have been ill-advised to sell the country’s gold reserves when we did, but the Con-Dem coalition is letting a much more valuable commodity than precious metal slip through the UK’s fingers – the very homes that we live in. When, one has to ask, will it put the rights of London’s indigenous homeowners before the wealth pouring in from overseas?

Author: John Yerou

John Yerou is the owner and founder of Self Employed Mortgages; a trading style & trade mark of the award winning Mortgage Quest Ltd. One of the most recognised names in providing mortgages for Self-Employed professionals across the UK.

In 2004 John began his career in Financial Services as an independent mortgage adviser and broker. John has been instrumental in negotiating bespoke underwriting for contractors with high street lenders.

His presence in the industry as a go-to expert is growing by the day and he is regularly cited and writes in publications both locally and nationally.

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