No cooling off in London

According to the Guardian Unlimited, ?the Land Registry said 2006 had concluded with a ?solid? rise in house prices,? lifting ?the average price-tag to #173 717.

?Once again, London was the engine-room of this growth, with prices in the capital rising 10.4 percent last year to hit an average of #314 550.?

According to Fionnuala Earley, Nationwide's group economist, quoted in the Sunday Mirror, London prices themselves were up 20 percent in 2006, despite the fact that the national house price slowed to 11.5 percent.

Furthermore, according to the Emerging Trends in Real Estate Europe 2007, published by the Urban Land Institute (ULI) and PricewaterhouseCoopers, Paris was rated as the top real estate investment market in Europe, with London following closely in second place. The survey indicated that London was the European city offering the least investment risk and the best prospects for rental growth.

So why invest overseas?

Investing in an overseas market is essential in diversifying your portfolio.

?Diversifying ones portfolio is essential for the successful creation of wealth and insurance against political and economical risks. Property has performed better then any other asset class over longer periods of time and when taking the decision to invest offshore the immediate answer should be bricks and mortar as being less risky then stocks and equity,? says Mariana Tolken of GAS Properties, a company which aids South Africans in buying property abroad, specifically in London.

What does it cost?

According to the Guardian Unlimited, homes are getting ever more expensive, with the average price now #173 717.?

Earley says, "the price of a typical house in the UK increased by the equivalent of #40 per day in 2006 ? three-and-a-half times faster than the #12.50 per day in 2005.?

Who can buy in London?

?Any foreign national can buy property in the UK. There are certain requirements of course, similar to South Africa?s FICA,? says Tolken.

With regards to legal restrictions, ?people with criminal records or those with tax problems are not able to take money out of SA and get successful mortgages on the other side.?

How does one apply for a bond?

You can apply for a bond in London through a mortgage originator.

?We introduce our clients to trusted mortgage originators and search for the best deal on the market,? says Tolken, ?you do need to have an income above R300 000 per annum however to qualify.?

What about interest rates?

When it comes to the interest rate, Marina says, ?the interest rate was recently increased to 5.25 percent, but has not in the past changed by more then 0.25 percent at a time.

?Most opinions are that it has already reached its peak.?

And despite two Bank of England interest rate rises last year, the housing market has remained resilient.

So what about the growth potential?

?Although expensive at a first sight, London properties achieve an average annual growth of 15 percent. Every eight years property prices in Central London have doubled, with growth over the past 35 years at 250 percent," notes Tolken.

The Olympic Games in 2012 are also bound to have an impact on prices.

What areas yield the best returns?

?Greater London achieves an average of 5.5 percent yield,? however, ?the returns depend greatly on how much you pay for the property,? says Tolken.

?Research carefully, familiarise yourself with the developer (if he is any good he wouldn?t be selling just to foreigners) and avoid big developments in saturated areas.

?The second part of the equation ? renting, is quick and easy ? demand for good rental properties exceeds supply.?

Forecasts for 2007?

The general view is that property prices in most parts of the UK will continue to rise, though at a slower rate than in 2006.

According to Earley, ?a recent Nationwide survey points to fewer people putting their properties on the market, resulting in demand outstripping supply in many areas, pushing prices up further.

?Huge demand and a continuing lack of supply will remain the largest factor in the London housing market in 2007 and there are no signs that the market is beginning to cool just yet."

?More large City bonus payments are likely to inflate property prices further. Other factors that will support house price rises include the investment in transport and development in advance of the Olympics. Stratford, near to where the Olympic village will be based, has seen prices increase by 14 per cent in 2006."

Earley also predicts that, ?overall we expect the London market to outperform the UK average in 2007. Prices are expected to increase by between eight and 11 per cent."