London attracted nearly half of the £6.1bn investment in residential property last year according to a new report out today by Colliers International.

Despite efforts to level up the economy, the capital enhanced its reputation as a property hotspot with £2.836bn of investment, which was seven times greater than the next highest city – Birmingham (£384m) – and a rise of £313m compared to 2019.

More than half of the £6.1bn – the joint highest figure on record with 2018 – was directed towards the build-to-rent sector (£3.5bn) and the strength of that market was reflected in the volume of BTR pipeline at the end of the year. It stood at 126,085 units, up 17% from 12 months earlier.

Andrew White, Head of Residential at Colliers, said: “UK residential property is a solid investment option in the UK, particularly in the burgeoning Build-to-Rent sector as there is a perfect storm of a shortage of housing, and a huge affordability gap, especially for those who want to work and live in London. Over the last year the sector has grown 20 per cent and is going to continue to grow to meet the country’s housing needs.

“In addition to Build-to-Rent our cities, and in particular London, will always be attractive to overseas investors. Despite Brexit the UK is still a gateway location to Europe and America, providing access to a secure financial market and another currency to capitalise on.”

As well as investment properties, consumer residential sales performed well last year. Although the first UK lockdown prevented property viewings from taking place, the Chancellor’s announcement of a stamp duty holiday last spring helped to capitalise on the pent-up demand which appeared once restrictions were lifted.

In Q4 2020 transaction figures reached 351,000, the second highest quarterly figure since the global financial crisis – Q1 2016 reached 387,000 ahead of second home stamp duty changes introduced in April that year. Also during Q4 there were 307,000 mortgage approvals, with an average mortgage size of £211,119.

Oliver Kolodseike, deputy chief economist at Colliers said: “It’s no surprise that the stamp duty holiday has resulted in a rush in home buying as the upfront costs become more obtainable. With affordability ratios continuing to deteriorate as house price growth outperforms earnings growth, house buying is as difficult as ever, particularly in the south east, and any support brought in by the government is welcomed. The extension of the stamp duty holiday, albeit with staggered increases, until October is likely to mean that this level of activity will be sustained through most of 2021.

“It is also helping the buy-to-let landlords to grow their portfolios again. The last time residential activity reached those kind of levels was before the additional three-per cent levy for second homes was introduced in April 2016.”

Other investment hotspots include Manchester (£317m, up from £80m in 2019), Sheffield (£150m/£44m) and Wembley (£203m/£17m).

To read the full report click here