Buy to Let Investment Trends in London

In this article, we will provide you a rundown of the properties in Central London on which investors are looking to expand their portfolio, while exploring what the data trend tells us about the residential lettings market and its prospects in the near future.

Buy-to-let yields

Since the onset of COVID-19, many investors have turned away from number of asset classes whose presumed capacity and security for long-term value creation were once thought impeccable. With lockdowns accelerating trends towards e-commerce and flexible working hours, investors have seen billions being wiped off of commercial property assets. While the residential lettings in London have sustained well despite the pandemic.

However, while commercial property has degraded, the value of residential property has fared well during the pandemic. Thanks to the extended stamp duty holiday, the sales market is optimistic and price growth has exceeded expectations, while a surprisingly strong lettings market benefited from continuous operation during later lockdowns and a barrage of activity as renters seek out properties that are more closely aligned with their post-COVID priorities.

Rents have begun to pick up for Central London properties, indicating that the worst phase may be over for London’s rental market. Earlier this year, the sale prices had also shown recovery. With international commuters and students returning to London, rents for Central London properties rose 1% in Q2 this year. This is the highest annual growth, the market has seen since 2007, showing strong signs of recovery from a 2016 downturn and the impact of the pandemic.

Rental values grew 1.8% for larger houses and 0.4% for apartments. Experts suggest that rents for Central London properties are likely to continue rising, with rental values expected to grow at 2.8% annually until 2025. Central London properties are witnessing its Q1 price growth since early 2020. Sale prices for Central London properties were still 20.5% below a 2014 peak, but prices rose by 0.6% in Q1 across all parts of prime London, and 0.7% in outer prime London, where family houses were high in demand due to private garden areas and larger spaces.

Overall, 97 Central London properties worth GBP five million or more were sold in the quarter, similar to sale numbers in the “post-election Boris bounce” earlier last year. The sale numbers were also 57% higher than that of Q1 2019. Indicating the sale prices will rise further in H2 2021, before moving towards “a more sustained recovery rate” next year, with a growth forecast of 3% for the end of 2021, and 7% for 2022.