Property investment is a tough nut to crack, particularly for newcomers to what is quickly becoming the biggest and most popular asset class in the UK.
With 2014 having been the strongest in UK property since 2005, many people are looking at this decade-long high as being the indicator that the time is right to invest their money in residential property.
But if you have this dilemma in front of you, will you be looking towards capital gains that can be made from property investment, or will you be turning towards the private rented sector? Knowing how the market is likely to perform for investors in London in 2015 is the best way to make this decision.
Capital gains to continue in 2015
For those who have invested in London-based property with capital gains as their main goal, the latest statistics suggest that 2015 will be yet another good year, but not quite as strong as 2014.
This year has been something of a revelation for the market, and London alone has been an important driver for the strongest year in British real estate for the last decade, with prices climbing by some 11.7 per cent.
In 2015, growth is not expected to be as strong - Marsh & Parsons predicts that we will see prices climbing by between three and five per cent depending on where property is owned. For people who are selling homes for capital gains, however, this will still represent a real opportunity for strong returns overall.
"The London housing market gave a stellar performance in the first half of 2014, but there won’t be quite the same encore next year. However, the curtain certainly isn’t going down on price growth. After touching the brakes in recent months, property values will continue to climb steadily again in 2015, albeit at a more modest and orderly pace," said Peter Rollings, chief executive officer of Marsh & Parsons.
Rent gains to outpace price growth
Once again, though, it is likely to be buy-to-let investment where the property sector really sees strength. Even as the purchasing markets have picked up since the start of 2013, demand for property in the rental sector has remained high, which has seen those who want to become a landlord welcoming strong returns time and again.
The rise of generation rent, groups of younger people who would rather rent than own their own home for convenience, has been the real driver behind this in recent years in prime London markets in particular.
However, into 2015 there will be another factor affecting the private rented sector, and this is likely to see the rental market outpace house prices considerably in the capital throughout the year.
Marsh & Parsons said that in the first half of the year in particular, the fact that the general election will add a degree of uncertainty to the market will mean a greater proportion of people will be looking to rent rather than buy. This demand will push rent prices up far faster than property prices, which is good news for those investing in the rental market.
The company believes that while prices will increase by between three and five per cent, the rental price for prime London properties will jump by up to ten per cent throughout 2015 as demand continues to grow.
Mr Rollings said of the prospects for the rental sector: "The rental market will be where much of the action takes place in 2015. Those relocating to the capital for work are now biding their time before purchasing their own portion of London property, until question marks surrounding additional property taxes are erased."
What's clear is that 2015 will be the time to invest in property in London as the market continues to build on a year that saw it achieve decade high levels of growth. When it comes to choosing, both arms of the sector will be strong, but predictions suggest it may be the year for buying to let in 2015.