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There’s no local in location

We have had a huge response in regards to the property we had for sale in Wembley. Admittedly it was cheaper than market price but that was not the main factor which drove the interest. The main push was Indians believe you should grow your flowers where you can water them.

Meaning investment in properties occurs in and around where a person  lives. Often  this decision  is made with  the foresight  that   perhaps ‘one of my children can also live there in the future’.

The 3 most important points when considering property investment is location,location and you guessed it location.

The need to be close stems from us all wanting to invest within our comfort zones as things can get scary if you go outside of these boundaries.  It’s an unknown and dangerous world out there. We know around here, we know the streets, the prices, we been here for years.

But going back to the 3 points, not one says local, it’s says location.

Let’s  look  practically  at  what  benefits  investing  locally  will  help with?

The first you can manage your own property, this means if the tap is broken you can go and mend it yourself and save on the charge of someone else going and some nasty agent over charging you.

You can look at the property daily and show others your property as it’s local, this no doubt has a feel good factor to it.

I would quantify the savings from the above to be between £1500 to £5000 per annum without putting a value on the feel good factor.

When considering a property worth £300,000 it represent  less than 2% of the value if we take the top end estimate.

This means that a superior location would need to grow by this much extra.

Central  locations have an  international demand,  therefore demand does not depend upon the UK economy exclusively. This is a very reassuring factor given the recent issues.

The  prime  London  rental  market  is  now  characterised  by  severe stock shortages and very high levels of demand, a combination that will underpin the strong price growth seen in 2010, says property consultant Savills.

Average  rents  grew  by  11.5  per  cent  in  2010,  according  to  latest analysis from the company’s research team. As a result, rents are forecast to grow this year by an average of 8 per cent across prime London and 7 per cent  in  the prime central zones. This compares  to a 1.0 per cent growth forecast for capital values across the capital this year.

Growth in 2010 was supported by a general lack of properties available to rent at a time when  increased demand  for rental property, particularly from corporate tenants, was recovering.

In summary it is always better to treat an investment in property as a pure investment and not to combine it with the possibility of one day staying in there. Each has a separate objective and when you try to mix the two you end up achieving neither one effectively.

Property is liquid, it’s even more so in prime locations. Potentially it can sold within 28 days and refinanced in 2-3 weeks. This will allow you to switch funds to a residential property if required at a later date.

So apart from the psychological comfort factor there is little financial reason to invest in property simply because it is local.

Suresh Vagjiani

MD Sow & Reap

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