Why Invest in the London Property Market and How to Profit

7 mins read

Undoubtedly, the London property market is one of the world’s most active that attracts foreign investment. This diverse housing market and capital include various property types, including historic homes, luxury penthouses and modern high-rise skyscrapers, that capture the attention of people all over the globe.

In addition, a strong economy, high housing demand, and supply shortage has prompted London’s housing market to experience significant growth in previous years. Hence the rising property prices and increasing competition, especially in Central London.

The COVID pandemic tested investors, prompting price decreases as people adapted to different working regimes and faced uneconomic certainty and job losses. However, London bounced back, and the current market looks positive.

Moreover, local attempts reassure markets with promises to increase housing supply and affordability. Indeed, London is the capital, golden child, and UK property gem. But is all this enough reasons to invest in London property, and what should potential buyers know about the market?

About Investing in the London Property Market

invest in london property

The Lure of International Investment Potential

A recent report by Easy Money, a real estate investment platform, reports the capital London to be the fourth market for potential house prices and profitable investments. First was Miami, then Dubai and Madrid, and London came next for showing the most return on investment. The pandemic undoubtedly rocked London, but property investment remains firm. So what’s the main reason for this?

There are various reasons, but investment in London is a surefire bet. First, the solid market will weather storms for decades to come. Second, London is what investors and experts call an alpha city. This means it leads in business, finance, trade, art, fashion, culture, cuisine, and everything else. Third, London is the UK capital face on global stages and does an excellent job matching other global cities like Paris, Madrid, Istanbul and Dubai.

International Investors and Strong Liquidity

Foreign investors love the vibrant metropolis and London property market and add strength and an even bigger market for selling and liquidity. Overseas investors flock for various reasons, including steady price appreciation and lifestyle. London’s vibrant and diverse reputation offers high living standards and cultural, leisure, and educational opportunities.

Let’s not forget the tourism market. The UK is politically stable, which gives foreign investors peace of mind. For some nationalities, the British pound devaluation gives them favourable exchange rates. Others bank on the fact that London’s world-class universities make the city an educational stronghold for student rental markets.

Rental Yields in London

One big question we get is from buy-to-let rent landlords interested in rental property investment in London and rental prices. One substantial aspect London offers that always attracts property investors is rental demand, which is still strong in London, with the central areas showing 65%.

However, there have been rental demand surges in outer London outskirts. Rental voids have not fallen, with landlords reporting an average of 70 days. London consistently ranks for rental yields, but remember, yields vary across the 32 official boroughs. Some rank at 4.5%, while others can even rise to 6%.

Tips for Buy to Let Landlords: Buy-to-let property investment is a popular way to generate income. However, buying property to rent out requires more research than buying property to live in. Here we provide detailed rent information and the latest figures about limited companies, disadvantages, advantages and other factors.

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The Stronghold of Central London

Central London represents the entire London region. As the hub of everything and anything, this area reassures both domestic and foreign buyers and investors. The central London region is typically summed up by high property prices, increasing demand and limited supply. Some neighbourhoods like Mayfair, Kensington, and Chelsea attract high-end buyers. In recent decades, as tech markets of greater London evolved, this boosted demand for housing. The scarcity of properties and high demand makes this London niche an anchor for investors and other boroughs.

Development in South London

South London suburban areas have recently seen significant development from large companies. They include

  • Nine Elms: This large-scale regeneration project in Battersea includes new London flat developments and public spaces. Called the most remarkable transformation of this century, the site boosted the profile of the former Battersea power station.
  • Canada Water: Canada Water included a new town centre and a much-publicised library. One key factor that draws buyers here is the exceptional transport.
  • Peckham Rye underwent significant regeneration with new homes, shops, and public spaces. As a result, the area now attracts young professionals and families and boasts of vibrant reputations for arts and culture.
  • Elephant and Castle: Elephant and Castle underwent significant regeneration. Sitting south of the Thames, 4 billion pounds was invested into public and private facilities.

Development in East London

East London underwent a significant transformation recently, with several new property developments. Stratford Olympic Park was the centrepiece of the 2012 Summer Olympics but is now a residential district with public spaces and sporting facilities. Royal Docks transformed to include business hotels and international restaurants.

In contrast, trendy Shoreditch attracts young professionals, artists, and entrepreneurs with fashionable clubs and bars lining the high street. Hackney Wick also boasts of an artistic and creative community, with new housing developments all the time. Alongside houses, they want to incorporate cultural and leisure facilities. Canning Town is also promoting 1750 homes in among safe and healthy environments.

Regional Differences and London House Prices

There are significant regional differences in the average house price across London, with some areas being much more expensive than others.

  • Prime central London: Properties in areas like Knightsbridge, Chelsea, and Mayfair have expensive house prices. These areas boast high-end shops, restaurants, and cultural attractions, attracting wealthy international investors looking to buy property.
  • Outer London: Properties in outer London, like Croydon, Bromley, and Romford, offer more affordable house prices. However, still compare because some towns have risen in profile and are now prime.
  • North vs South: London has a north-south divide for house prices. The South is typically more expensive than the north because of its proximity to prime London and the area’s reputation.
  • Regeneration areas: Areas undergoing regeneration, like Nine Elms and Battersea, offer reasonable house prices; however, anyone looking to buy property in these areas of the capital must be patient while regeneration is still in progress.

Tips for First-time Buyers in London

The thing to remember is that buying in London is different from elsewhere. This market is another ball game, and preparation is key. Any first-time buyer should already have a good idea of their finances, including income, expenses, and credit history.

Also save for a larger deposit, to compensate for the fact that London property prices are higher than in other parts of the UK. Know what you can afford but don’t forget to factor in the legal fees and closing costs. Include ongoing costs of owning property, like mortgage repayments, insurance, and service charges.

Speak to mortgage brokers or financial advisors to help you understand options and choose the best mortgage. Also, use a conveyancing solicitor. The London property market is competitive, and properties can sell quickly, so be prepared to act rapidly. If you’re finding it difficult to buy a property in London, consider shared ownership, where you buy a portion of a property and pay rent on the remaining share. Crowdfunding is another new option.

Property Investment Tips

  • Understand local property markets, average house prices and what drives demand in areas. Look at transport links, employment opportunities, and local amenities, which impact property value and rental demand.
  • Properties in prime areas hold value and attract high demand for rental. But also look for good transport links, top-rated schools, and amenities, like shops, restaurants, and parks.
  • Property investment is a long-term strategy. Therefore, consider capital growth potential over the next ten years for mid- or long-term investment rather than short.
  • Inspect every property because the cost of repairs and renovations quickly adds up. Properties in good condition or those with potential for modernisation offer the best returns.
  • Investing in London property is complex, so seek professional advice from investment property experts, mortgage advisors or financial advisors.
  • Diversification is critical when investing in property. Investing in different types of properties, in other areas, and at different average price points minimises risk.

Using a Mortgage

For a UK house mortgage, you need good credit scores, and you can get this by paying bills on time, reducing credit card balances, and following recommendations on credit reports. The larger your deposit, the more favourable mortgage payments will be. Aim to save at least 10% of the house purchase price, but save 20% or more to be investment savvy.

With many UK mortgage providers, compare mortgage options and terms to find the best mortgage. An investment online comparison site simplifies the process. Before house hunting, get pre-approved for a mortgage. This will give target property prices and make the house-buying process quicker and smoother.

Fixed interest rate mortgages offer the security of knowing exactly how much repayments will be regardless of changes in interest rates. However, fixed-rate mortgages may come with higher interest rates than variable-rate mortgages.

When applying for an investment mortgage, be honest about your financial situation, including income, expenses, and debts. Every mortgage lender will verify this information, and providing false information could result in mortgage applications being rejected. Finally, mortgages take months to complete, so start the process early.

Other Aspects in London’s Favour

Multiculturalism: Despite being the UK capital, much of London’s population was born abroad, enjoying combined local and foreign influences. Various restaurants serving national dishes from almost every country enjoy healthy trade every evening as locals taste their way around the world.

Architecture: London’s rental architecture features grand Georgian townhouses, elegant contemporary penthouses, and modern, budget studio apartments.

Entertainment and Leisure: This hard-working, hard-playing city offers bars, discos, nightclubs, casinos, restaurants, and pubs. Visit Royal Albert Hall, Wigmore Hall, The Royal Philharmonic Orchestra, and other monthly events in cinemas, opera and dance houses, theatres, museums, and art galleries. Meanwhile, sports enthusiasts enjoy venues like Wembley Stadium, Emirates Stadium, Lords Cricket Ground, London Stadium, the Oval, O2, and Crystal Palace Sports Centre.

Education: London features world-class universities, including UCL and Imperial College hence the high student population. Additionally, students stay in London given the careers and job outlets.

International and Local Travel: Besides offering air travel hubs like Heathrow, London links to Europe and Ireland with regular ferry services and the Eurostar high-speed train. London is also two and a half hours or less from Manchester and Sheffield, and Brighton an hour away.

Tourism: Enjoy world-famous tourist attractions like London Tower, Tower Bridge, St Paul’s Cathedral, Buckingham Palace, River Thames, British Museum Westminster Abbey, and Globe Theatre.

World-Class Shopping: Think shopping malls, high street brand names, boutiques, and designer stores in Harrods, Knightsbridge and Oxford Avenues, Bond Lane, Kings Road, Covent Garden, Jermyn Street, Carnaby Street, Camden and Portobello Road.

Start Your Property Search in London

We are professional agents with available properties in areas prime for commercial and residential investment in London. We have helped many people get on the property ladder and find the right property for their budget and needs. Start your property search in metropolitan and suburban areas in London, or contact us today and speak with an agent about investing in the London property market.

About Natalie

Natalie is a dedicated real estate professional currently working at Spot Blue International Property. With over a decade of experience in the industry, she has acquired a wealth of knowledge and expertise regarding global properties.

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