Buy-to-let property investment in London sees a 14.87% return in 2023 · 26/02/2024
At a local advice evening, I got chatting with one of my out-of-town landlords who was back in London visiting his family.
Brought up in London, he went to the Queen Elizabeth’s Hospital School for Boys back in the 1960’s and is now a University lecturer in central London.
To enhance his retirement, he has a small portfolio of four properties in London and wanted my advice as a leading letting agent on where to purchase his next buy-to-let property in London as he lives in a college-owned flat and would never dream of buying where he lives in Kensington where the average value of a flat is £1.62m and a City house averages at £4.1m.
Before I could advise him, I reminded him that the most important thing when considering property investment in BS postcodes is to find a London property with decent rental yields for income returns, yet at the same time it must have the potential for capital growth from rising house prices over time. Our London property agents advise on these elements.
Going into the Spring of 2024, London property landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buy-to-let properties and a squeeze on mortgage interest relief will raise their ongoing costs.
Before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely it is that the rent will increase. Our letting agents in London monitor these factors for our property landlord clients.
Interestingly, the average rent of a London property currently stands at £1,062 per month, which is a rise of 2.9% compared to 12 months ago – but this rise in rents is for new tenancies and not existing tenants. Our London letting agents are keen to stress this.
Back to yield and capital growth, the average value of a London property currently stands at £275,200, meaning the average yield stands at 4.63% per annum, which on the face of it many buy-to-let landlords in BS postcodes might find disappointing.
As a leading letting agent operating from offices in Chelsea and Downend, if I were to look at one-bed flats in London, which are the sort of properties a lot of property investment landlords buy, the average value of a one-bed flat is £163,600, whilst the average rent for a one-bed flat is £718 per month, giving a yield of 5.27%.
However, if that wasn’t high enough, there are buy-to-let landlords in London who own some specialist properties with specialist tenancies, that are achieving nearly double that yield – it comes down to your attitude to risk and reward.
Ultimately property investors in London want to be making gains from both rent and house price growth. Our London property agents provide expert advice on both these elements.
When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our University friend from Kensington.
Return on investment is everything in property, and as an experienced letting agent in London, providing the very best buy-to-let property advice to landlords is the key.
So, looking at property values in London, they have risen in the last year by 9.6% – which means the current annual return on investment for a typical one-bed flat is 14.87% a year.
To keep up-to-date with the rented property sector in London, visit my property blog here.