London Property Investment: Should I Invest in London Property? 

Contents

Chapter 1: Why Invest in London?

Chapter one of our property investment London guide will discuss the reasons why you might (or might not) choose to invest in London in 2023.

Here, we will look at three reasons why London property investment is a compelling choice and why it is no longer the best investment you can make.

Key Topics:

• Latest Property Investment Market Data
• Three Reasons Why You Should Invest in London
• Three Reasons Why You Shouldn’t Invest in London

Why Invest in London in 2023? 

London property investment can be a confusing topic to discuss. 

With sky-high prices and lower-than-average rental yields, property investment in London isn’t accessible for everyone. 

Yet, the city still sees its fair share of investment, particularly from foreign sources. 

In fact, a report from Statista in 2018 found that London featured 458 foreign investment projects – 12 times higher than Manchester in second place. 

But why is this the case? 

Let’s find out and explore three reasons investing in London is a wise choice. 

1. London Rent Is Incredibly High 

The main reason behind the continued real estate investment in London is the sky-high rental income generated from property. 

As of 2023, the average rent in the London region is around £4,679 per month. 

For comparison, this is 298% higher than the UK national average, which is incidentally the highest it has ever been at £1,175 PCM, according to HomeLet. 

In fact, London average rent is so high that it practically trebles the rent in every popular UK property investment hotspot, as you can see from the table. 

2. Top Destination for Commercial Real Estate 

While investments in London may not be the standout choice for residential property, commercial real estate investment is another story. 

Taking advantage of London’s serious pull for businesses, investors from across the globe choose London as their ideal commercial property hunting ground. 

In fact, back in 2019, a report from real estate firm Knight Frank found that London was the world’s number one spot for commercial real estate, seeing around £16.2bn worth of investment. 

For comparison, this was higher than the iconic Manhattan (£14.3bn), Paris (£12.1bn), and Hong Kong (£8.4bn). 

Most interestingly, these statistics have continued to persist despite the impact of Covid-19 and Brexit, with Savills reporting that commercial real estate investment is “exceeding expectations” in 2021.  

This considerable level of international investment sets a commercial property investment in London apart from other European cities. 

Around £3.69 billion was spent on commercial real estate in London in 2017 alone from Chinese investors. 

Sadly, for prospective residential investors in London, the same cannot be said for residential real estate – something we will address in a later section. 

3. Massive Regeneration in London 

As the UK capital, London attracts the bulk of UK inward investment, which has led to some considerable regeneration in the city. 

Ever since the 2012 Olympics hosted in London, there has been a series of transformative projects helping the capital continue to flex its economic muscles on the world stage. 

Likely the most extensive upcoming regeneration efforts in the city are: 

• Thamesmead – A 30-year master plan aimed at regenerating the Thamesmead neighbourhood. Work includes 8,000 new homes, 4,000 jobs, and improvements to 5km of riverbank and 7km of canals. 
• Old Oak Common and Park Royal – A £26 billion project set to create a transport superhub, a brand-new high-street and a £3bn Imperial College. 
• Canada Water– Covering 53 acres, this is one of the largest mixed-use regeneration projects in London. It is expected to deliver around 3,000 new homes, 2 million sq ft of workspace and 1 million sq ft of retail, leisure, entertainment and community space. 

The planned regeneration in Canada Water, in particular, is one to keep your eye on, as the expansion of the Jubilee Line by 2029 could likely help develop the area into a major transformation hub. 

To learn more about UK regeneration, be sure to click the link and read our full 2021 guide.  

Why Shouldn’t You Invest in London in 2023? 

Now that we’ve covered three reasons why you should invest in London, it’s time to look at reasons why property investment in London is best avoided for most investors in London. 

These reasons include: 

1. High property prices 
2. Low rental returns 
3. Dwindling rental demand 

Let’s get into it! 

1. High Property Prices for Investment Properties in London 

The primary reason why property investment in London is a poor choice for most UK investors is its affordability. 

Simply put, you will likely struggle to afford investment properties in London due to the enormous prices seen in the area. 

According to the latest UK House Price Index figures, property prices in London are around £885,406. 

From the same source, the wider London region now features an average price of about £533,986. 

These are considerably high numbers, especially compared to the UK average, which currently stands at £289,818. 

That means city of London prices are 205.50% higher than a typical UK property. 

These numbers can be on the low end of the spectrum, with affluent London locations like Kensington and Chelsea having considerably higher property prices. 

Currently, a typical Chelsea property on Zoopla can set you back an eye-watering £2,464,211. 

Likewise, a Kensington property on Zoopla costs, on average, a staggering £2,595,467. 

These property prices are undoubtedly astronomical, which has put many people off property investment in London. 

Factoring in Stamp Duty rates, too, and you could be spending a lot of money on your London rental property or commercial property purchases. 

To work out the latest Stamp Duty rates, be sure to use our free Stamp Duty calculator. 

2. Low Rental Returns for Property Investment London 

Despite the high rent found in London real estate investment, the high cost of property has led to some dismal rental yields in the capital’s residential property market. 

Understanding rental yields is one of the most important tips for investing in property. 

Rental yields are the return on your investment you earn through rent. It’s calculated by dividing the yearly rental income by the original purchase price and multiplying it by 100 for a percentage. 

These yields are a crucial element of any property investment venture, with higher yields meaning stronger rental returns. 

Using the latest Zoopla data, gross rental yields in the city are around 7.6%. 

While this figure may not seem incredibly low, it’s important to note that this is just the gross yield, meaning expenses aren’t calculated. 

Due to the high cost of living seen in the capital, the NET yields will likely be far lower than this. 

For comparison, it’s common to find properties in Liverpool and Manchester with over 8% NET rental yields. 

These rental yields illustrate why focusing on just rental income per month is not the best measurement, as you can likely get better returns elsewhere due to the lower property prices. 

For example, let’s say you invest in Manchester, a city with house prices of around £203,835. 

For the price of one London property, you could buy three in Manchester with money left over. That means you could expect a yearly rental income of almost £50k – £10k more than London. 

With Northern cities like Liverpool and Manchester offering everything an investor needs for a solid investment, there’s no reason why investors into the UK property market shouldn’t also explore the wide range of opportunities available in these cities. 

This is important to keep in mind if you’re considering buying property in London.

3. Rental Demand Dwindling With Renters Leaving the Capital 

While there is significant demand for property in London, these numbers have dwindled in recent years. 

Although London property has always been the go-to city for ambitious young people, recent figures have started to show that more people are moving to Northern cities like Manchester. 

Around 13% of Londoners leaving the capital choose to live up North to take advantage of affordable prices and exciting business potential, limiting tenant demand offered by investment in London. 

Recent developments such as MediaCityUK in Salford, home to major business headquarters like the BBC and ITV, are attracting people from around the country. 

This surge of people leaving the capital to move up North is likely to have a big effect on the London property market and change the buy to let opportunities available for those who wish to invest in London property. 

Since many people leaving London are young professionals, the demand for quality property with higher-than-average rental yields will diminish, replaced by demand from tenants with lower incomes. 

In fact, this mass exodus of people leaving the capital, accelerated by Covid-19, has led to severe downturns in the local rental market. 

Leading estate agency Chestertons found that London rental stock had dropped by 58% year-on-year in September 2021, with many landlords choosing to sell up. 

This year, experts at Leaders Romans Group expressed continued doubt in the London rental market, stating that the capital’s reputation as one of the best cities in the world to build property is “no longer viable”.

This is not a good sign for the future of property investment in London and is vital to consider if you’re sizing up investing in London property. 

Currently, the average London property is valued at £885,406, according to the latest available Land Registry data in January 2023. 

This is 7.023% higher than recorded the year prior but is a decrease of 7.11% compared to December 2022.  

These are impressive numbers, but house prices like this may put off many investors looking at buying property in London at an affordable price. 

Property Prices by London Region 

To help you learn more about house prices in London, take a look at the following table to find the average property prices available for each region, according to Zoopla. 

Currently, East London is the cheapest location for real estate investment in London, with the average property valued at £523,043. 

Here you can get flats and terraced houses for just £403,444 and £563,951 respectively, which is incredibly cheap for London. 

The most expensive area is Central London. For a terraced house, you can expect to pay a whopping £3,903,861. 

Due to London property prices, if you are an everyday investor in need of a mortgage loan, many real estate investment London opportunities are unachievable. 

These figures highlight how important it is to do your research when finding the best investment opportunities London has to offer. 

London House Price Predictions for 2023 and Beyond 

If you decide that investing in London property is the right choice for you, you’ll likely want to know about the capital growth potential of real estate investments in London. 

Historically, London property has seen huge rises, with the average London property price rising by almost £600k since 2001. 

Naturally, while these London house prices have seen considerable increases in the past, it has now reached the point where percentage increases are now very minimal. 

This is highlighted in the latest property price predictions from Savills. 

Property prices are set to decrease by 12.7% in 2023, a drop that is 4.2% more than the North West and Yorkshire. 

There’s also minimal growth expected in 2023, 2024, and 2025, with an overall five-year increase of -1.7%.  

How Has Covid-19 Affected London Property Investment? 

While 2021 remained a promising year as a whole despite the uncertainty brought by the Covid-19 pandemic, the London property market has experienced some changes that have impacted property investment opportunities in London. 

Most notably, the rental market in London has experienced a shift in line with changing rental market trends. 

As a result of the Covid-19 lockdown, renting habits have changed, which has had dire consequences on the viability of London buy to let. 

A 2020 report from estate agents Benham and Reeves found that the top three tenant priorities are fast broadband, outside space, and proximity to green space. 

Due to the nature of central London buy to let, more and more people are choosing to leave the hustle and bustle of the capital for a more peaceful living experience elsewhere. 

This is why modern developments like Central Park in Liverpool offer outdoor green spaces to meet this growing demand. 

What’s it Like Living in London? 

London is iconic. 

With a population of nearly nine million, the city is renowned for being one of the best places to live and work. 

Home to around 15% of the UK population, and 23% of UK-based businesses, the city is overflowing with opportunities for both work and play. 

While the cost of living is higher than anywhere else in the UK, the city has so much to offer residents who can afford the commanding premium of capital city living. 

Chapter 3: Best Places to Invest in London 2023 

Chapter three of our guide will help identify the top places to invest in London in 2023. 

Here, you will find a breakdown of the best areas to invest in London by postcode, region, and area name. 

Using the latest data, you will be able to find out where to invest in London property 2023. 

Key topics: 

• Where to invest in London property 2023
• Best areas to invest in London by postcode 
• Best places to invest in property in London by region 
• Best places to buy London property by area 

The Best Places to Invest in Property London by Postcode 

If you’re looking at where to invest in property in London and want the highest yields, the following five postcodes are perfect for you if you are interested in property investment in London. 

The best property investment London postcodes are E20, E4, NW7, SE28, N9. 

• NW7 – Covers the Mill Hill region and can generate solid 7.82% returns despite an astronomical average price on Zoopla of over £830k. 
• E20 – Spans Olympic Park and Stratford and provides gross rental yields of 6.10% on average. 
• SE28 – Consists of Thamesmead and delivers sizeable rental returns of 8.65%, with an average price of over £300k. 
• E4 – Covers Chingford and Highams Park, offering rental yields of 4.43%. 
• N9 – Spans the Lower Edmonton area and provides average house prices of over £360k with 5.61% rental yield returns. 

Other areas that could be considered the best area to invest in London property are Ilford, Romford, Barking, Dagenham, and Harlington. 

This is because these areas also offer decent yields, with high demand levels and high rental income. 

Although still more expensive than elsewhere in the UK, property prices in these locations tend to be more affordable than in other London boroughs. 

This is why market research is vital if you want to know how to invest in London successfully. 

Without knowing the best places to invest in property in London, it can be challenging to make a healthy profit. 

For the most successful London investment, be sure to consider the best property investment London postcodes mentioned. 

Potential for Future Growth With Investment Opportunities London 

While the opportunities for property investment in London aren’t looking particularly promising, some areas are worth considering. 

Several areas in London are expected to experience property growth in the coming years. 

Whitechapel, Canary Wharf, Earls Court, Old Oak Park, and Croydon are all predicted to make their mark on the property map and make perfect choices if you’re wondering where to invest in London property. 

This is due to several regeneration projects, with plans for improved transport links and the creation of thousands of new homes and jobs. 

Select London investment properties have been predicted to reach rental yields as high as 7%.  

Chapter 4: Alternatives to London Property Investment 

In the penultimate chapter of our guide, we will be looking at alternatives to London property investment in the UK. 

Here, you will find more affordable and higher returning options that compete with property investment in London. 

You’ll learn more about the South East, North West, and West Midlands options performing well in the 2023 property market.  

Key topics: 

• London vs Luton 
• London vs Liverpool and Manchester 
• London vs Birmingham 
• FAQs about property investment in London 

Currently, London’s best commuter town is Luton.  

Voted the best commuter town for two consecutive years by estate agents Jackson-Stops and voted the best place to invest for first time buyers in 2021, Luton is a fascinating investment solution for London investors in 2023. 

The Bedfordshire town outperforms London in every aspect of capital growth potential. While gross rental yields are slightly lower than in the capital, you can find world-class Luton investment property like The Hive with huge 5% NET returns.   

The town is also only 22 minutes away from Central London, making it incredibly popular for young professionals. 

You can learn all about Luton property investment and eight reasons you should invest in the town in our complete 2023 guide. Just click the link to read more.  

How Does Property Investment London Compare to the North West? 

We know that London property investments in certain areas can offer a level of return on investment and some expected growth over the years to come. 

But what about those who don’t wish to wait for growth and want to benefit from the highest yields possible? 

The North of England has gained a positive reputation throughout the property market as of late.  

Comfortably the best places to invest in property UK, Liverpool and Manchester boast some of the best market statistics in 2023. 

Outperforming property investment in London through capital growth, affordability, and rental yields, the cities currently boast some of the most lucrative property investment strategies. 

Affordability is especially vital for the North West’s superiority over buy to let London opportunities. 

To make the divide between North and South a little clearer, all you need to do is consider what type of investment properties London offers for the same price up North. 

Put £500,000 towards a London investment, and you can barely purchase a standard one-bedroom apartment on Zoopla. 

Whereas, you could buy a five-bedroom house with a large garden and driveway for the same price in Liverpool. 

The prices of the properties at RWinvest are proof enough that Liverpool and Manchester offer some of the best deals, with our pioneering eco property, ELEMENT – The Quarter starting from just £74,950. 

Look towards London off-plan property, and you’d definitely struggle to find a price anywhere close to this. 

While London property investments and London investment property are incredibly popular amongst overseas investors, more and more people are choosing to invest in the North West thanks to the high potential on offer. 

You can learn more about Liverpool property investment and Manchester property investment by clicking the links. 

You can learn all about Birmingham property investment by clicking the link and reading our updated guide for 2023. 

Chapter 5: Investment Property for Sale London  

Looking to start investing in London property? Ready to buy a property in London? Then our final chapter is here for you. 

Chapter five will help you find the latest investment opportunities in London. 

If you’re looking to invest in London and want to find the latest investment properties in London and the wider South East area, then keep reading for more information. 

Key topics: 

• Investment Property for sale in London 
• Best property investment London opportunities 
• Exclusive London investments