One of the main questions asked by those investing in property is ‘should I invest in property London has to offer or should I look elsewhere?’. While there are some benefits to investing in London property, there’s also a lot to think about to ensure you’re making the right decision. Find out more in our helpful guide to London property investment.
Should I Invest In Property London?
London has long been considered the place to be to invest in property. England’s capital city sees flocks of tourists, overseas workers, and investors heading to London year after year to take advantage of the sights, attractions and opportunities available. Those considering their first investment in the UK might automatically look towards London property investment, but is this city really the buy to let investment hotspot that some of us might think it is?
Is property in London a good investment?
London property investment can be a worthwhile venture if you are selective with the areas you choose to invest in. If not, you could find that your investment suffers due to low rental yields, dwindling demand, and slow property price growth in many parts of London.
High property prices
The Office for National Statistics reports that the average London home cost £115,000 twenty years ago, growing to an average of £351,000 in 2008 and standing at around £671,412 by 2018. Capital appreciation had long been the main force driving people to buy London investment properties, with the potential for London properties to grow in value over recent years. If an investor had purchased a London property for £200,000 in 2007, near Kings Cross station, for example, this would now be worth over £300,000.
However, this growth in the investment in London property prices comes with a decline in rental prices. In February 2017, the average rental property in London was let for around £1,280, presenting a one per cent decrease year on year. High property prices and lower rent means one thing for investors — some disappointing average rental yields. Those investing in off-plan property in London can expect yields at an average of 3.7 per cent, which is a lot lower than some other areas of the UK.
Potential for future growth
While the opportunities for property investment London offers aren’t looking particularly promising, things are starting to look up in the future. Several areas in London are expected to experience property growth by 2020. 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 set in place for the city, 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 six per cent by 2020.
Where to invest in London property?
If you’re looking for the best area to invest in London property, consider areas like Ilford, Romford, Barking, Dagenham, Hayes, Harlington, and Thameshead. This is because these areas currently offer average rental yields of 5 per cent and above, making them a good option to seek out a property to invest in.
Look for affordability and demand
Although still more expensive than elsewhere in the UK, property prices in these areas tend to be more affordable than in other London boroughs. Since these areas – like many in London – see high levels of demand, rental costs can remain high, which brings the benefit of more attractive yields when you invest in property. This is the main reason why market research is so vital, especially if you want to find out how to invest in London property and make a healthy profit.
Consider capital growth
While these areas make a solid choice for property investment in London for 2019, it’s always worth looking ahead into the future. As mentioned above, some areas in London, such as Earls Court and Croydon, are expected to see growth by 2020. This makes them good options if you want to find the best area to invest in London, allowing capital growth to improve along with rental yields.
Property Investment Up North Vs London
But what about those who don’t wish to wait until 2020 to invest in UK property? The North of England has gained a positive reputation throughout the property market as of late. Cities like Liverpool and Manchester have made a name for themselves as the go-to areas to invest in property, and rightly so.
Higher rental yields up North
Liverpool is a city in which property investment is growing in popularity, largely due to the fact that the city offers some of the best rental yield rates in the whole of the UK. The average rental yield in Liverpool is around 5.05 per cent, with an estimated rental growth of 17.6 per cent throughout the next five years. At RW Invest, our investment opportunities in the North offer yields that range between 6 to 9 per cent in some of the most prime locations in Manchester and Liverpool.
Compared to the investment properties London offers, buy to let opportunities in Liverpool are a lot more affordable, with an average house price of £130,677 and a noticeable difference in the cost of living in Liverpool vs London. This makes property investment more accessible to those with a lower income, while increasingly high rental costs in the city are maintaining the impressive rental yields.
To make the divide between North and South a little clearer when it comes to property, all you need to do is consider what type of investment properties London offers for the same price up North. For £500,000 in London, you can purchase a standard two-bedroom apartment, while for the same price up in Liverpool you could buy a six-bedroom house with a large garden and driveway.
The prices of the properties at RW Invest are proof enough that Liverpool and Manchester offer some of the best deals, with our now sold out Hamilton Hub student property boasting the lowest price in the UK from just £45,450. Look towards London off-plan property, and you’d definitely struggle to find a price close to this.
The success of Liverpool on the property front is most likely fed by the growing demand for high-quality property in the city. The London property market is currently over-saturated, with around 50,728 properties available for rent — a recipe for disaster when it comes to a 1.12 per cent decrease in rental price growth. The city centre population of Liverpoolis now the fastest growing in the UK, with a 181 per cent increase between 2002 and 2015 thanks to the number of students and young professionals heading to the city each year.
The student population of Liverpool and Manchester is a big factor that contributes to the Northern property market’s success. A combined total of around 155,000 students populate Liverpool and Manchester, all of whom are looking for quality accommodation. Not only this, but the wide range of business opportunities in these cities is bringing in attention from more and more young professionals.
London has always been the go-to city for ambitious young people, but figures show that in recent years more people are moving to Northern cities like Manchester to take advantage of affordable prices and exciting business potential. New 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 a large amount of the 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.
Some of the London property hotspots of 2018 and 2019 include areas with a lot of potential for capital growth. Upcoming London areas include Shepherds Bush and Peckham Rye, both of which are introducing new business opportunities and plenty of local attractions, restaurants, and bars for residents to enjoy. Property development companies in London are starting to build new homes in these areas, but with an average price of £518,773 for an apartment, why invest more money in London when you could invest less for the same quality and better potential up North?
Is buy to let a good idea 2019?
Despite Brexit uncertainty and the unpredictable nature of the London property market, UK buy to let investment remains a good idea for 2019. Many cities in the UK offer fantastic opportunities for buy to let investors and the chance to make attractive returns through both rental income and capital gain.
Unlike other types of investment such as stocks and shares, the buy to let market offers both short term and long term returns. When you purchase a property in a prime UK location, you can benefit from consistent rental income each month, along with the chance to make big returns when you decide to sell the property – provided the value has increased.
The potential that lies within the UK buy to let market is what makes it stand out towards foreign investors. Overseas investment has always been popular in London, with the proportion of international investors buying London property at an all-time high. London property news has presented findings showing thatinternational investment across London had grownby 30 per cent year on year. Overseas investors may be tempted by investment opportunities in London due to presumptions that since London is England’s capital, it’s the most reliable city to get involved with.
International investment isn’t just prevalent in the capital, with Liverpool and Manchester also considered prime cities for foreign investors to pursue. Northern cities have gained the attention of foreign investors who are vigilant about investing in the cities with the best returns, and with the buzz surrounding the Northern Powerhouse as of late, Liverpool and Manchester are viewed as key opportunities.
Chinese investors make up the largest number of overseas investors in the UK property market, but during the first half of 2018, Chinese investment in London had reached its lowest level in two and a half years. The latest property price news shows that buy to let property in London is becoming less attractive to investors from China and Hong Kong, who are put off by the high prices and disappointing potential for rental returns.
These types of foreign investors are being drawn in by the affordability and promising prospects for off-plan property offered by Liverpool and Manchester, particularly with the active student communities of these cities. The purpose-built student accommodation market is an appealing sector for international investors, with five of 2016’s biggest student property deals being made with foreign investors.
Should I invest in London property?
All in all, is it really worth it to invest in the London property market? While several property investment companies in London may claim that the city offers some worthwhile opportunities, the numbers show that when looking to invest, London property might not be the best option when investments up North present much more potential.
So what if you want to know how to invest in London property while still seeing some lucrative returns? Those adamant on investing in London property should do so wisely, researching the best places to buy in London and being prepared to wait many years to see desirable returns. One of the most important tips for investing in property to remember to pay attention to is rental yields, and making sure you understand how to calculate them.
To do this, take your estimated monthly rental income and multiply this by 12 for your annual figure. Once you have this figure, divide your annual rent by the property’s purchase price and then multiply this by 100 for your rental yield. Keep this calculation in mind when shopping around for London investments to avoid making the wrong purchase.
WithNorthern cities Liverpool and Manchester offering everything an investor needs for a solid investment, there’s no reason why first-time or experienced investors into the UK property market shouldn’t also explore the wide range of opportunities available in these cities and elsewhere, and not simply focus on London.
For 2019 and beyond, the outlook is strong for UK property investment. In the north-west, in particular, property price growth is set to exceed any other region with an increase of 21.6 per cent over the next five years, making 2019 the perfect year to get started with your buy to let journey.
Here at RW Invest, we offer a choice of fantastic choices of new build property to invest in. Located in Liverpool and Manchester, all of our properties have competitive rental yields, attractive prices, and strong capital growth potential. If you’re a property investor that’s not interested in the types of property investment London offers and want to discuss our available properties elsewhere, don’t hesitate to get in touch and our team of property professionals will happily advise you on the best opportunity for you.