London’s buy-to-let property market is one of the most lucrative for investors not just in the UK but worldwide. Recent trends show that London attracts around 100,000 new residents each year, all of whom need a place to live. This influx of residents has led to a significant increase in demand for rental properties, driving up rental prices and making it an attractive market for investors.
And with London’s average property costing £715,000 (over £350,000 more than the UK average), almost everyone who lives in London rents. This presents a golden opportunity for private and institutional investors to enter the market and potentially reap substantial rewards from London’s sky-rocketing rental market.
If you’re looking at investing in a buy-to-let property in London, you need to read this article until the very end. Over the next few sections, we’re going to cover:
- London’s average rental yield
- The best areas for buy-to-let properties right now
- What to look out for when choosing a buy-to-let property in London
But before we go over any of the above, we’d first like to give you an overview of London’s buy-to-let property market and why you should invest in it in the first place.
Why Invest in a Buy-to-Let Property in London?
There are many reasons why investing in a buy-to-let property in London is a smart move. As England’s capital city, property prices are practically guaranteed to keep rising, providing a secure and stable investment option. This means that over time, you’ll make money on the property even if you don’t rent it out.
However, that’ll hardly be the case. As we mentioned, nearly 100,000+ new people make London their home each year, contributing only to the rising demand for rental properties.
Once you invest in a rental property in London, you’re not just collecting rent each month. You’re also benefiting from the appreciation of the property’s price. When you sell your tenanted property, you’ll profit from the sale, too, offering you a potential for high returns.
London’s Average Rental Yield
According to Zoopla, the average rental yield in London is 4.93% as of Q1 2024.
This means that if you were to buy a property in London for the average price of £ 715,000 and rent it out at the average monthly rent of £ 2,000, you could potentially earn a gross rental yield of 3.36% per year.
While this may seem quite low compared to other parts of the UK, it’s largely a result of the high property prices. Londoners pay the most in rent each month compared to renters in any other part of the country—averaging just north of £2,000.
If you’re a buy-to-let investor looking for the best possible rental yield, don’t worry. There are plenty of areas in London that offer rental yields much higher than the average 4.93%. In the following section, we’ll explore three such locations.
London’s Best Areas for Buy-to-Let Properties
Though property prices in London are pretty steep, plenty of areas are perfect for investing in buy-to-let properties. Some of the areas that we’ve found to be in the highest demand among renters and have the best rental yield include:
Barking and Dagenham
Situated to the North of the River Thames, the London Borough of Barking and Dagenham is London’s most lucrative buy-to-rent spot, offering a gross rental yield of 6.22%. Properties in that part of town are also significantly lower than the London average, costing an average of £398,571.
Newham
Located just above the London City Airport, Newham is another up-and-coming hotspot among Londoners who want to live near the city centre (around 9.5 miles). The average property in this part of London costs £462,838. As for the rental yield, it’s the second best in London, currently sitting at around 5.89%.
Bexley
Finally, we have the village of Bexley, situated southeast of London and around 15.6 miles out of central London. Property prices here average around £484,892, and the gross rental yield you can expect is about 5.68%.
With all of the above in sight, the buy-to-let boom is not over yet and won’t be for a long time.
So, if you’re still considering investing in such a property, consider the three locations we mentioned, as they currently offer the best value for money.
What to Look Out for When Choosing a Buy-to-Let Property in London
Before signing the papers and investing your hard-earned money in a buy-to-let property in London, you first need to consider who your ideal tenants will be. Once you have a general idea of your target market, some of the things that you need to look out for when choosing a buy-to-let property include:
The Area and What’s Around
Most people in London also work there but don’t own a car. So, when buying a rental property, you must ensure it is close to primary public transportation links.
That way, tenants who like to move around the city quickly will appreciate the location of your property and how easily they can take advantage of London’s vast public transportation system. Other things to keep in mind as far as location is concerned are the facilities and amenities around. Some examples include gyms, spas, restaurants, cafes, and cinemas.
The Condition of the Property
Most buy-to-let property investors are attracted to London’s rental market because of the high monthly rent that they can get from their tenants. However, the location of your property often isn’t enough to demand London’s high rental prices.
Ensuring the property is in excellent condition before purchase is a practical step to take. This is especially important if you’re not willing to invest a significant amount of money to bring it up to standard. It’s a confident move to make in the London buy-to-let market.
London Tenanted Properties
Despite the sky-high prices of properties in London, the English capital remains one of the most lucrative buy-to-let destinations for private and institutional investors. With over 100,000 new residents, the London rental market and the demand for rental properties are growing.
After reading the above, we hope that you are now equipped with all of the information you need to decide whether investing in a buy-to-let property in London is worth it.
