Is London Property Investment Still a Wise Move for Investors?
Estimated reading time 11 minutes
The English capital known for its rich history, vibrant culture, and status as a global financial centre, has always been attractive to local and international investors looking to buy London property investments.
However, post-Brexit, the pandemic hangover, the work-from-home trend and the cost-of-living crisis London property investment has faced several challenges, and a number of questions have been raised as to whether to invest in property in London.
What is the current state of the London property market?
The average prices by property type in London for January 2023 were as follows:
- Detached – £1,094,132;
- Semi-detached – £699,758;
- Terraced – £589,355;
- Flat/Maisonette – £438,596
Whilst selling London property has not been immune to the global economic downturn. Inflation, rising interest rates, and economic uncertainties have impacted the market and recently caused a market slowdown. As detailed below there are still a number of London property investment opportunities.
- The ONS House Price Index noted a drop in the average house price from completed sales in London to £525,600 in June 2023, from a September 2022 peak of £544,500.
- GLA Housing Market Report August 2023 shows house price growth has fallen sharply in recent months and remains lower in London than in any other region.
- Recent data from Rightmove shows that the average price of London homes coming to market fell by 0.6% over the last year.
What are the changing dynamics and opportunities of buy-to-let?
The opportunities to invest in, or sell buy-to-let property in London has undergone significant changes since the pandemic with a dramatic surge in demand alongside a significant fall in the number of rental properties in London.
Increasing costs of managing a buy-to-let property due to the renter’s reform bill, selective licensing and all the subsequent extra costs and legislative changes have seen increasing numbers of landlords exit the market.
However, continued very high demand for rental properties in London are driving rents higher, with landlords having no shortage of tenants as demand outstrips supply. There has also been a shift in living preferences, with many seeking larger homes with gardens and office spaces.
- Average asking rents for new tenancies in London reached £2,567 in Q2 2023.
- Rental growth rates growth rates in Inner and Outer London converged at 13.7%.
Where to invest in property in London?
When considering where to invest in property in London, it’s crucial to understand the different opportunities the city offers. From new-build developments to period properties, London caters to a wide range of preferences and investment strategies. New-builds, in particular, are popular among investors for their modern facilities, good transport links and potential for capital appreciation. However, there is an oversupply of units in certain areas and the number of starts, completions and sales over the last year has fallen. This has been partly driven by the end of the help-to-buy scheme and the increased costs of construction.
So, while the London property market remains robust in certain aspects, particularly in the rental sector, it is also facing challenges, including reduced house price growth and a slowdown in new housing developments. It is therefore important for investors considering the London property investment market to research the areas and properties before buying.
Best areas to focus on for London property investment
The investment appeal of boroughs in London outside of the traditionally expensive neighbourhoods are creating new opportunities for investors. Areas where there are ongoing and/or planned regeneration projects, where there are new and improved transport links are creating new opportunities for investors looking to capitalise on emerging trends in the London property market.
Acton (London Borough of Ealing)
Regeneration Projects: Acton is part of the wider regeneration of the Old Oak and Park Royal area, which is set to become a major transport hub with the arrival of HS2 and the Elizabeth Line (Crossrail). This project is one of the largest regeneration schemes in London, aiming to create thousands of homes and jobs.
Transport Links: The area benefits from improved transport connections due to the new Crossrail stations, notably Acton Main Line station, enhancing connectivity to central London and other areas.
Finsbury Park (London Borough of Islington, extends into Hackney and Haringey):
Regeneration Projects: The Finsbury Park area has undergone significant regeneration, with new residential developments and improvements to public spaces. The City North development is a notable project, offering new homes, retail spaces, and leisure facilities.
Transport Links: Finsbury Park station is a major transport interchange with Underground, National Rail, and bus services. The area’s connectivity is further enhanced by the Victoria and Piccadilly lines, offering quick access to central London and other destinations.
Penge (London Borough of Bromley):
Regeneration Projects: While Penge has not seen large-scale regeneration projects like other London areas, it has benefited from local improvements, including enhancements to high streets and public spaces.
Transport Links: Penge has good transport links with several railway stations, including Penge West (Overground and National Rail) and Penge East (serving Victoria and Orpington), making it accessible to central London and surrounding areas.
Rotherhithe (London Borough of Southwark):
Regeneration Projects: Rotherhithe is involved in the broader Canada Water Masterplan, a major regeneration project transforming former industrial docks into a new residential, cultural, and commercial area.
Transport Links: The area is served by the Rotherhithe and Canada Water stations on the London Overground, as well as the Jubilee line at Canada Water, providing excellent connectivity.
Brent Cross (London Borough of Barnet):
Regeneration Projects: The Brent Cross Cricklewood regeneration is a significant project in this area. It includes the redevelopment of the Brent Cross Shopping Centre, new housing, new parks, and public spaces, as well as improvements to local infrastructure.
Transport Links: The area is set to benefit from the new Brent Cross West Thameslink station, improving access to central London and beyond. The existing Brent Cross tube station on the Northern Line also provides good connectivity.
The appeal of London’s diverse neighbourhoods
Exploring investment opportunities in the outer London boroughs, we find several areas that are becoming increasingly appealing and potentially financially rewarding for property investors. These outer London boroughs offer a mix of affordability, growth potential, and lifestyle benefits. Their appeal lies in the combination of lower entry prices, ongoing regeneration efforts, improving transport links, and community developments, making them compelling options for property investors looking for opportunities outside the more expensive inner London areas.
OUTER LONDON BOROUGHS
Barking and Dagenham (East London)
Appeal: Known as one of the most affordable boroughs in London, Barking and Dagenham is undergoing significant regeneration, with new housing developments and infrastructure improvements.
Investment Attraction: The area offers high potential for capital growth. The ongoing redevelopment projects and improved transport links, such as the proposed extension of the Overground, make it an attractive prospect for long-term investment.
Croydon (South London)
Appeal: Croydon is transforming rapidly, with extensive redevelopment projects like the Westfield shopping centre and new residential developments.
Investment Attraction: The area is becoming a hub for tech companies and startups, boosting employment opportunities. Its relative affordability compared to central London and improving amenities make it a hotspot for investors.
Havering (East London)
Appeal: Havering, including areas like Romford, offers a suburban feel with good access to green spaces. The borough is benefiting from the Crossrail project, which significantly improves connectivity to central London.
Investment Attraction: The arrival of Crossrail positions Havering as an attractive area for commuters, likely driving up property demand and prices. The borough’s relatively lower property prices present a good opportunity for growth.
Enfield (North London)
Appeal: Enfield combines urban and rural elements, offering a variety of property types. The borough is seeing new developments and infrastructure improvements.
Investment Attraction: With competitive property prices and ongoing regeneration, Enfield is appealing to families and professionals. The area’s growth potential is bolstered by its transport links and community amenities.
Bromley (South East London)
Appeal: Bromley is one of the largest London boroughs, known for its green spaces and excellent schools. It offers a more peaceful, suburban lifestyle while still being within easy reach of central London.
Investment Attraction: The borough’s family-friendly environment and high quality of life make it a solid choice for residential property investment. Bromley’s property market has shown consistent growth, making it a financially rewarding area for long-term investments.
Hounslow (West London)
Appeal: Hounslow enjoys a strategic location near Heathrow Airport and major employment hubs. The area is diverse and offers a range of residential options.
Investment Attraction: The proximity to Heathrow makes it ideal for rental investments targeting airport workers and professionals. Ongoing and planned developments in the area indicate a positive trajectory for property values.
We cannot ignore the prestigious London neighbourhoods, including their respective boroughs and unique characteristics that make them attractive for property investment. Each of these neighbourhoods offers a unique mix of cultural, architectural, and lifestyle elements that make them highly attractive for London property investment.
The combination of prime location, historical charm, and exclusivity, make them highly appealing to investors seeking to capitalise on London’s luxury property market. The investment in these areas is often driven by their stable value appreciation, rental potential, and appeal to high-end buyers and renters
Kensington & Chelsea (Royal Borough of Kensington and Chelsea)
Appeal: Kensington & Chelsea are synonymous with luxury and exclusivity. It’s known for its grand Victorian and Georgian homes, beautiful garden squares, and world-class cultural institutions like the Victoria and Albert Museum and the Royal Albert Hall.
Investment Attraction: The area is a magnet for both domestic and international investors due to its prestigious location, historic architecture, combination of modern luxury apartments and elegant period homes and proximity to central London. High property values and a stable market make it a safe investment choice.
Belgravia (City of Westminster and Royal Borough of Kensington and Chelsea):
Appeal: Belgravia is characterised by its grand terraces of white stucco houses and picturesque squares. It is one of the wealthiest districts in the world and is known for its quiet, residential streets.
Investment Attraction: The area’s prime location, stunning architecture, and exclusivity make it highly desirable for property investors. Belgravia is a classic choice for those seeking stable, long-term investments in prime London real estate
Notting Hill (Royal Borough of Kensington and Chelsea)
Appeal: Famous for its colourful townhouses, bustling Portobello Road Market, and annual Notting Hill Carnival, Notting Hill offers a vibrant blend of cultural diversity and upscale living.
Investment Attraction: The area’s unique character, combined with high-end shopping, eclectic dining options, and a strong sense of community, makes it appealing for investors seeking properties with personality and charm.
Hampstead (London Borough of Camden)
Appeal: Hampstead is celebrated for its beautiful Hampstead Heath, a sprawling ancient park, and its charming village feel. It’s a haven for intellectuals, artists, and celebrities, boasting stunning hilltop views of the city.
Investment Attraction: Hampstead offers a more relaxed pace of life compared to the city centre, making it attractive for those seeking a blend of urban convenience and green space. Its historic homes and high-quality local amenities contribute to its high investment potential.
St Johns Wood (City of Westminster)
Appeal: St Johns Wood is known for its leafy streets, elegant homes, and proximity to Regent’s Park. It is also home to cultural landmarks such as Abbey Road Studios, famous for its Beatles connection.
Investment Attraction: The area is one of the most exclusive in London, with large detached houses and luxurious apartments. Its close proximity to central London and peaceful residential feel makes it highly desirable for high-net-worth individuals.
London property investment offers opportunities
In conclusion, despite the recent market slowdown and economic challenges, London’s property market continues to offer a stable and lucrative investment opportunity. The city’s diverse culture and global status make it an attractive destination for property investors. There are any number of investment opportunities making London property a wise move for investors, whether you are attracted to regeneration projects, diverse neighbourhoods, transport links, luxury apartments, historical homes or new builds, London has it all which is why it continues to attract both local and foreign investors.
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