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Is now a good time to invest in London property?

April 16, 2024

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Key Highlights

UK

Changing markets and financial fluxes can put investors off from investing in prime locations. Here’s why it is still a good time to invest in London property.

London has always had timeless appeal for property investors, due to its stability, resilience, and culture. It is the epicentre of the UK’s education, culture, business, and much more. Right now is the best time to purchase London property and start your property investment career in an exciting, sleepless city that brings so much to the table.

 

Buying a property in London sooner rather than later can mean increased wealth and savings, as while property prices have experienced a drop there is a positive outlook for strong capital appreciation later on. With so many people coming to the city every year and the city’s skyline drastically changing, London is still an investment opportunity you won’t want to miss.

 

Of course, independent research and second opinions are critical before making an investment decision. However, here are a few reasons why now is a good time to invest in London property.

 

Why now is a good time to invest in London property?

 

Property Prices

The London housing market can be sometimes volatile and unpredictable. In the face of recent political and economic problems the UK has weathered recently, this has resulted in a slight drop in house prices. It is predicted that the cost of an average London property could drop by 10% this year, according to Savills. However, despite the drop Savills still predicts that the average house in London could be worth over £70k more in five years.

 

This is excellent news for investors and first-time buyers alike, as this means they can secure a cheaper property at a fixed rate before experiencing growth. The London property market, while experiencing setbacks from time to time, has seen exponential house price growth in the past few decades so it is clear that the likelihood of capital appreciation is strong. This alone makes it a fine choice for investors looking to build their wealth via long-term rental income and capital appreciation.

 

According to Rightmove data, the average London property was £709,108 in the past year. When looking at specific property types, the main property purchases during this period were flats which sold for an average of £547,510; whereas terraced properties sold for an average of £794,764. Semi-detached properties sold for an average of £766,820.

 

Signs of strong financial growth are also reflected in the city’s rental prices. Zoopla also showed the average monthly rent in London stands at over £2,250. This reflects an increase from approximately £2,190 per month in the same quarter of 2022.

 

Interest Rates

 

Interest rates in the UK hit a record high in the past couple of years, to combat inflation.  When buying a property for investments, everything needs to be considered and that includes interest rates. Currently, the UK’s base rate for interest stands at 5.25%.

 

High interest rates can affect mortgage rates and your monthly repayments. For off-plan properties that have not been completed, interest rates are only applicable three months before the building’s scheduled completion. This means that investing in off-plan property in London may be a better option as it means that the interest rate will have likely gone down significantly by that point. Interest rates in the UK are already expected to fall to 4.5% this year, with further drops predicted by 2025. The Bank of England is expected to cut the base rate to 3% by 2025.

 

Interest From Abroad

 

The UK capital has always had a long-standing appeal for foreign investors. London attracts a range of international buyers, often due to its wealth, political stability, education, business, and economy.

 

The pound has also significantly weakened in the past couple of years, owing to a range of political and socio-factors. This is a positive thing for investors looking to purchase property from outside of the UK as it means generally lower initial costs, potentially higher capital gains, and stronger rental yields.

 

Growing Population

 

London is the most populous city in the entirety of the UK and has the third biggest population count in Europe – only coming after Moscow and Istanbul. Currently, London has nearly hit 9 million people. It is predicted that this figure will hit 11 million by 2030 as more people flock to the city year on year to work, study, and play.

 

With a further 2 million people estimated to increase the city’s population, it is clear that more homes are needed to meet this exponentially growing demand. Currently, there are hundreds of regeneration projects and development works happening all over the city centre and beyond. More and more people are also looking to the outskirts for cheaper rent and a quieter place to live, leaving more pockets of investment opportunity to be discovered.

 

Increasing Rental Yield And Income Potential

 

The London property market is one of the fastest-growing property markets in the world. Chestertons has predicted a 5% increase in rents in central London and the wider UK area for 2024. For Greater London, Chestertons has predicted a 4.5% rise in 2024. 

 

Rental yields in the city are considered strong, rarely ever dipping below 5% and often reaching 8% and over. The city is so vast, with varying property types, house prices, and more that there are a range of areas with different predicted rental yields.

 

Interest rates, while currently high in the UK, have also been predicted to fall. The country is slated to experience interest rates sharply and further this year, after the UK experienced a drop in inflation to 3.9% in November 2023.

 

Summary

 

Now is still a good time to buy London property as an investment. Lucrative, stable, and with a strong chance of capital appreciation, investors can make large returns and build wealth from their London investment rental properties. For experienced investors or those just beginning, all investors can benefit from getting guidance and advice from a property investment agency.

 

North Property Group is a property investment agency and lettings agency with a focus on upmarket, quality UK real estate. Our highly experienced team has full knowledge of the UK’s real estate market and can offer professional and personalised advice to help you find the best investment opportunities when they arise. Book a free consultation with us today to start your investment journey.

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