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Property Investment In London
London is the capital city of England. It is full of cultural and historical attractions, including Buckingham Palace, the Houses of Parliament, the London Eye and Tower Bridge, to name just a few. The London Underground is an integral part of the city, providing a rapid, comprehensive transport system covering the entire region.
London is one of the leading financial centres of the world, serving as a particularly important location for international banking and finance. The finance sector, predominantly based in the City of London and Canary Wharf, is the bedrock of the city’s economic strength, helping to stimulate huge growth in the region.
Furthermore, regeneration schemes across the city aim to satisfy the growing demand for city-centre living, with many boroughs enjoying exciting new developments.
Why invest here?
London is a complex place to invest. It is not currently somewhere to invest if you are looking for very attractive yields. Furthermore, it is the highest value part of the country in terms of property prices and as such investing is very expensive, especially when you factor in your one-off cost of stamp duty.
However, it’s a different story when you look at what London has to offer by way of capital growth. For example, if you had bought a property for £430,000 in Q1 of 2014, then this year it would potentially be worth £526,046 (Nationwide HPI).
That is excellent capital growth and creates an unparalleled return on investment, especially after factoring in the rent you would have been receiving over the years.
Types of Property Investment in London
Buy-to-let in London is a strong investment strategy, given the capital's huge rental demand.
Properties will never be short of tenants who are willing to pay a premium price to have close access to workplaces and the city's amenities.
Buy-to-let yields tend to be tighter the closer to the centre as prices are higher, but there's still value to be had by venturing further out.
Ultimately, property investment in London is all about picking the right location to balance yield and capital growth.
Commercial real estate can be a brilliant investment, especially in London which serves as a popular destination for companies to set up shop.
This mode of occupancy is particularly attractive as commercial tenants tend to secure long-term, full repairing leases (FRI), so the rent received is net of maintenance and operating expenses.
Prime yields for commercial property in London averaged between 4% to 4.75% at the end of 2018.
If you are unfamiliar with London but you’re looking to invest in the city, we recommend getting familiar with all the different areas. Below, we’ve picked out three areas we consider the best for property investment in London.
Central London is home to some of the most expensive property in the world. Investors must bear this in mind as it typically means rental yields are lower. For example, an area like Mayfair can offer as little as 1.5%.<br /><br />However, our own research shows such properties tend to enjoy the highest rates of long-term capital growth in the country, so any choice depends on an investor’s budget and objectives. Many investors seek a balance between the two by looking slightly further afield for properties that still offer easy access to the centre, but at a more affordable price and with better yields.
East London typically offers more affordable property prices and stronger yields. Even premium, inner-district locations such as Canary Wharf can achieve a 4.1% yield. However, further out there are even stronger results to be found, with Foxtons reporting rental yields of 6.4% in Barking and Dagenham.
Promising yields can be achieved in South London. Similar to other areas, the further out you go, the more prices reduce and yields can increase. Areas such as Wallington and Mitcham can offer yields of around 4.7%. If you delve a little deeper and search hyper-locally then you can find great investment opportunities, such as Merton, which has been known to achieve yields around 6.3% (Foxtons).
The other areas of London (North and West) also have good places for investing and they are worth looking into. For more information on these areas, please feel free to get in touch.
Future Growth in London
Frequently Asked Questions
Below you can find a range of common questions from previous investors. If you require specific details and advice please do not hesitate to contact us today on +44 203 627 3987 or via [email protected].
01. Is London a good place to invest for capital growth?
Typically, London prices do very well over the long term. For example, after the last major global financial crash in 2008, they excelled.
Savills published that between 2007 and 2017, London property prices grew by 63.5%. The average across the rest of the UK was only 15.8%, for comparison.
02. What price can I expect to pay for a property in London?
According to Zoopla (September 2021), the average price paid for a property in London is £706,267. The average price paid for a flat is £526,041.
03. Have house prices increased in London?
London house prices has increased by 14.29% in the last 5 years (Zoopla June 2020). Hometrack’s latest report shows house prices have increased 1.1% between April 2019 – April 2020.
04. Is London a good place to invest for yields?
Realistically, you will generally get better yields when investing further north (such as Birmingham, Leeds, Liverpool and Manchester), as initial purchase prices and stamp duty will be considerably lower in comparison to London.
That said, if you pick certain areas of London, you can find quite good yields, but it isn’t easy. Totally Money’s buy-to-let yield map reports that London’s E12 postcode can achieve yields of 6.04%.
05. Is HS2 going to be in London?
The HS2 will efficiently connect London with the Northern Powerhouses and will cut the commute time to and from these place. London Euston Station will be one of the stations along with Old Oak Common which is a new super hub and set to be the best-connected rail station in the UK.
06. What do you think of London?
“With the current prices in London it is hard to get a good yield or ROI in comparison to investing up north and prices don’t seem to be really increasing any time soon. That said, there are some areas to look out for with regeneration projects in the pipeline that means they are likely to experience good capital growth.” – Tobi Mancuso, Director.
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All information accurate as of September 2021