Why Invest in London properties?
1.Economic growth of London
The City of London drives the country’s economy by generating over £85bn in economic output per annum. Most of the economy in London is based on modern industries, which keep the city on top of the growth charts. There are almost 614,500 workers in the city, and city jobs have grown over 13% from 2019 to 2022.
According to another report, London is expected to see a 1.0% rise in workforce jobs in 2024, rising to 1.3% in 2025 and 1.5% in 2026, attracting more working professionals to the city. More job opportunities and growth in business outcomes motivate young professionals to stay and work in London, driving the demand for buy-to-service accommodations and rent-to-service accommodations.
2.Rise in property prices
Though the property market in London suffered to some degree during the Covid-19 pandemic as house prices and rents fell for the first time in many years, the market is getting back on track. According to the UK house price index for December 2023, the house price decreasing rate in London has slowed down. It decreased by 4.8% in the 12 months to December 2023, up from a reduced rate of 5.5% in the 12 months to November 2023. This shows the market is starting to stabilize, contributing to increased property investments in London. While the slower price rise will potentially encourage property buyers to enter into the market, existing homeowners will get some relief in putting their property on service.
3.Demand for rental properties
According to a recent report, London continues to have the highest average house price in England, which is nearly £527,979 as of June 2023. Climbing the property ladder is still a dream for many Londoners who prefer renting properties. Along with meeting the growing demand for rentals, the annual private rental price has risen in London to about 2.5%, marking a good rental yield for property investors in London.
4.Undersupply of houses
London ranks among the most populous metropolitan areas in Europe, with thousands of immigrants flying to the city every year. According to reports, the population of London in 2022 was 8,866,180. In 2023, an estimation was made that out of every 50 Londoners, one will be homeless. The gap between the rapidly expanding population in London and the supply of high-quality residential property creates better opportunities for property investors to buy homes and put them out on rent. Investors with lower capital can lease a part of someone else’s home and put it out for short-term rentals.
5.London property investment market
The GDP of London in 2022 (as per Statista): over £508bn (highest among most of the regions in the UK)
The expected GVA (Gross Value Added) growth rate of London by 2026 (as per London’s Economic Outlook Summer 2024): 2.2%
Rise in private rental prices paid by tenants in London in the 12 months to August 2022(as per Office of National Statistics): 2.5%
The average house price in London as of June 2023: £528,000
The total population of London in 2022: 8,866,180
Economically active population in London between March and May of 2024: 5,032,000
Types of property investment opportunities in London?
1.Rent to Service Accommodations (RENT2SA)
Rent to Service Accommodations are the properties where investors lease a property from homeowners and use it for short-term rentals. They pay a part of their income as monthly rent to the homeowner and keep the remaining with themselves. Usually, investing in these properties is more profitable than traditional rentals.
2.Buy to Service Accommodations (BUY2SA)
Buy to Service Accommodations are properties that investors need to buy first and then put out for short-term rentals. These are best suited for tourists and business travelers looking for a smaller stay in London. However, you need to be careful about choosing the location. Only the properties near prime tourist spots, business hubs, education centers, and better amenities and travel facilities get better rental yields.
3.BRRRR (Buy, Refurbish, Rent, Refinance, Repeat) Property Investment
BRRRR properties are a great investment, as investors buy a property that requires refurbishment and then put it out for rent. With the rental income, they refinance to pull out the equity and then repeat the process. London’s regeneration and infrastructure development projects are providing numerous opportunities for property investors to find properties that have attractive capital growth potential.
London city development and growth projects
London regeneration projects are one of the major reasons behind increased property investments in the city. These projects are not only reshaping the physical landscape but also creating employment opportunities, better connectivity, availability of modern amenities, and enhanced standard of living.
One of the influential city development projects is the £9bn Battersea Power Station initiative, where a 42-acre former industrial brownfield site is to be converted into a residential and commercial property along with 19 acres of public space. The extension of the Northern Line to Battersea enhances its connectivity to major regions, making it an attractive location for property investors.
King’s Cross redevelopment project is another initiative that motivates property investors to choose the 67-acre underused industrial site, which is being transformed and rejuvenated into a thriving urban district with 50 new buildings, up to 2000 homes, ten major public spaces, a university, and the restoration of 20 historic buildings and structures.
Some other regeneration projects in London to mention are the £4bn Elephant and Castle project and the regeneration of Docklands and Canary Wharf.
The £4bn Elephant and Castle project aims to build 5,000 homes, pedestrianized town centers, improved transport infrastructure, 450,000 sq.ft. of new retail space, a greener environment, and 10,000 new jobs. This growth project in London makes property investment a great choice for people.