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Are London rental properties still the best investment?

As the country continues to rebuild despite the continuing global pandemic, I (Cengizhan Cerit) wanted to share my thoughts on where the property market in London sits and answer the big question, are London rental properties still the best investment?

In property investment, the most important considerations are the demand for property and the rental yields. The latter is, of course, determined by your investment choices and costs. The current market drives the former. Thankfully, the demand for rental properties across the country, and not just in London, remains incredibly high.

The question is, where are the best investment areas in London?

The pandemic has been a challenge for many people with investment properties. Thankfully, the COVID-19 vaccination programme has meant the property market is starting to move once more and look stronger every month.

Mortgage lenders are now offering low interest rates and raising the lending limits in a bid to keep the property market moving after the stamp duty holiday has been phased out. Because the property market has been helped to remain relatively stable even despite the pandemic, rental demand has remained healthy and rental returns have proved promising over the past two quarters.

Andrew Wishart, property economist at the consultancy Capital Economics, said: “Unsurprisingly, given the end of the stamp duty holiday in September, demand for mortgage lending dropped back. That reflects the surge in home moving in the summer abating. But we think that loosening credit conditions and limited stock will continue to support house prices.”

Landlord instructions are even said to have increased to 12 percent year on year, and tenant registrations have continued to soar by 22 percent from January to May 2021.

Which areas in London are the best for property investment?

Of course, the numbers matter where any investment is concerned. Location and property type do too and no more so than in London. Despite changes in tax and legislation, many property investors and landlords still consider property a profitable endeavour. As a result of the confidence, many buy-to-let landlords plan to increase their portfolio rather than reducing it.

Many areas are still ‘up and coming’ in London and remain a key for those wishing to invest and see positive rental yields. One of those areas is the East End of London. This area is currently showing the best investment returns across all the London boroughs, with rental yields around 6% and higher in the second quarter of 2021.

With the first phase completion of Crossrail expected to be open in early 2022, the Abbey Wood area is seeing a strong lead within East London, boasting an average yield of over 6.5% in the second quarter of 2021. Investment within the region has increased with the prospect of 12 high speed trains to central London expected every hour.

Commuter hotspots are smart rental property investment areas.

Commuter areas have always been a smart investment for those wishing to rent properties to tenants. No more so than now, with people choosing to live on the outskirts of London in areas considered to be more suburban and green.

The suburbs are even more attractive with the introduction of hybrid working, which has put an end to the everyday need to commute to the office.

Thanks to major housing developments and the consideration of improved transport links to the city of London, Dagenham is proving an excellent investment opportunity for those seeking strong rental yields of around 6.3% in high demand areas.

When considering to invest in a buy-to-let property in London, focus on these 3 key areas:

  • Redevelopment and regeneration
  • Improvements to transport infrastructure
  • Rental behaviour – Suburban properties and outside space are now in greater demand

Commuter hotspots are expected to remain a smart place to invest and continue to provide strong returns as tenants move away from Central London. The areas in London that are now experiencing redevelopment will remain the best investment areas, especially if there are also planned transportation improvements.