Surrenden Invest London

London 2017 – buy-to-let investors keeping the faith

By Surrenden Invest | March 21, 2017
BACK TO MARKET RESEARCH

Property prices in London are a law unto themselves. The London housing market is one of the most exciting – and sought-after – in the world, while rental property in London also generates a great deal of interest. Figures from the HomeLet Rental Index show that average rental values in the UK capital reached £1,520 pcm in February 2017. That’s a jump of 23% since 2011, according to the London Economic (compared with a 14% rise across Great Britain as a whole).

For buy-to-let investors in London, the prestige of owning a property in such an iconic city, combined with the high rental income, is a winning combination. Regardless of Brexit, England’s capital city remains a firm favourite with investors from around the world.
The London housing market, like many of the UK’s larger cities, is facing a massive shortfall of residential accommodation. Supply simply cannot keep pace with demand. Some 50,000 homes are required annually in the capital in order to address the shortage. At present, only around half that amount are being built.
Buy-to-let property in London plays a key role in servicing the capitals residents over the coming years. According to PwC, 60% of Londoners will rent their home by 2025. The fact that 60% of the capital’s residents were owner-occupiers in 2000, throws the huge spike in demand for rental property in London into sharp relief.
Rising prices have played a large part in this trend (though they are far from being the only factor behind it). Figures from Savills and the Land Registry show that the average property price in London is £530,000, while the median inner London salary stands at just £34,000 a year. First-time buyers pay an average of £96,000 for their deposit, according to Halifax. For many Londoners, renting is the only option.
London draws in bright young things from around the world thanks to its employment opportunities, cultural pursuits and world-class social scene. 16% of Outer London’s population is aged 25 to 34. The figure rises to 25% for Inner London, compared with the ONS’s figure average UK figure of 13%. But many of those who head to the city for work will never be able to buy there.
Buy-to-let investors in London also benefit from the sheer size of the city. Such incredible diversity makes for a wide variety of up-and-coming areas and investment entry prices. This makes London attractive to a broad range of investors.
While the UK’s 2016 decision to leave the EU, and the formal Brexit process beginning in 2017, have made many families in the UK more cautious about moving house, the capital remains an enticing prospect for buy-to-let property due to the fact that demand for housing in London so vastly outstrips availability. Despite the Brexit-related uncertainty, prices in the capital still rose by 3.2% in 2016, according to London estate agent Foxtons.
The long-term outlook also remains positive. Projections from Savills for house price growth over the coming five years put central London price growth at 21%, other prime London growth at 15%, suburban growth at 16%, inner commuter area growth at 20% and outer commuter belt growth at 19%. Any Brexit-related jitters in prices are expected to be short-lived, with promising prospects for growth over the five years to the end of 2021.
London’s infrastructure and connectivity also support property investment in the city. As well as outstanding services running across the city, London is easily accessible from other major UK cities, as well as operating fast, regular train services to key European destinations. The city is also served by a vast network of airports, including Heathrow, Gatwick, London City, Stansted and Luton.
In addition, new travel infrastructure projects such as Crossrail and HS2 are benefitting buy-to-let property investment in London by creating newly desirable pockets of the city along their routes. Additional and enhanced commuter links are improving London’s already impressive transport network and benefitting investors as well as residents.
While investors are of course focused on London’s unique potential in terms of financial returns, there is also an added bonus to buying property in the capital. The prestige of owning property in London is not to be underestimated.
London is famous around the world. According to the MasterCard Global Destinations Cities Index, it was the most visited city in Europe in 2016 and the second most visited city in the world, welcoming some 15.96 million international visitors. From Big Ben and the Houses of Parliament to the London Eye, the English capital’s iconic imagery is recognised far and wide. Owning buy-to-let property in London unarguably carries a certain credence.
All in all, the financial and reputational aspects of London real estate investment combine to make the city a truly unique offering when it comes to buy-to-let property investment. With a population of 8.674 million, more than 50% of whom rent their homes, buy-to-let investors in London enjoy access to in excess of 4.3 million tenants. Coupled with the projected five-year price rises of between 15% and 21%, it’s hard to argue with the logic of turning to the housing in London when it comes to profiting from a UK buy-to-let investment property.

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