Having a well-constructed London property investment strategy in place can help you make the right decisions when buying prime real estate in London.
In this Buyer’s Guide, we’ve put together six timeless property investment rules for London prime real estate, to keep your property portfolio headed in the right direction.
This isn’t hard and fast – think of it more as a London property rule of thumb – but it should give you a checklist to fall back on when making your next investment.
First of all, let’s take a brief look at why a London property investment strategy is so important – and what factors go into our six London property investment rules.
The London prime real estate market sees long-term reliable demand – which helps to keep the value of your investment high.
Prime property is located throughout the city, in areas including Belgravia, Chelsea, Kensington, Knightsbridge, Mayfair, Regents Park and many others.
A good London buying agent will help you to find the right property in the right location, whether you want to live in it, renovate it for resale or rent it out as a buy-to-let investment.
The London prime property market supports different styles of investment, from individual buy-to-let purchases, to investing in multiple properties, to off-plan acquisitions. When it comes to London property investment, Camilla Dell from Black Brick explains “Back in 2007, the most common type of investment client was single unit buy to let investors. Investors tended to be a mixture of overseas and domestic, buying for capital appreciation, a modest rental yield, diversification and potentially an asset to one day pass down to children.
Fast forward to 2024 and today single buy to let investors have largely disappeared from the market, replaced by larger more commercial investors, such as funds, family offices, corporate investors and high net worth investors who tend to buy in bulk, 6 or more properties which benefit from lower commercial stamp duty rates, or standalone freehold blocks of multiple apartments. The main reason for this shift is largely tax driven. Changes which came into effect in 2014 made it more expensive to purchase and hold buy to let properties. However, for larger, corporate Landlords who can structure their purchases efficiently, there are still many benefits to be had in the prime central London rental investment market, which is currently experiencing high levels of rental growth, and increased demand as people return to city living post Covid. Black Brick are experts when it comes to assisting investors with strategy, sourcing the right assets which will perform well over time, and crucially property management.”
Again, the best buying agents in London will be able to work with you to understand how much you want to invest, and whether one or multiple properties will give you the best returns on your capital.
A good London property rule of thumb is to look at the expected rental yields and capital gains on any potential buy-to-let investment.
Yields are closely tied with the property’s location, while prime areas are likely to see higher demand, adding to the capital gains over time.
Remember that rental yields are more immediate, giving you a continuing income stream, whereas capital gains are only made when you sell the property, allowing you to decide what timeframe you want to apply to your investment.
With all that said, let’s look at our six timeless property investment rules. Together, these add up to a well-rounded London property rule of thumb.
For a comprehensive London property investment strategy, speak to a prime buy-to-let buying agent like Black Brick, who can advise you on the full variety of minor and major issues that should influence your buying decisions.
Our first and foremost London property rule of thumb is to go where the demand is highest. Prime London buy-to-let real estate holds its value well, and supply is relatively short, making for a reliable investment over the long term.
Past trends form the basis of a well-informed London property investment strategy. Make sure you’re not buying into a property bubble, but instead keep your focus on sensible, objective investments with a high probability of generating good yields and capital gains.
If you’re planning to rent out your London investment property, work with a reliable management company who have professional experience with prime property. Putting a specialist third-party managing agent in charge of your rental portfolio can make it much more scalable, and means you should never face an urgent phone call from your tenants.
Protect your investment by renting to the right people. Tenant vetting can include financial checks, as well as references from previous landlords. Prime London property is worth millions – it’s only fair to know who you’re trusting with the keys.
London property expert Camilla Dell is keen to highlight the importance of background checks and due diligence with tenant profiling – “It’s important that tenants pass Right to Rent Checks which are a legal requirement before letting your property to them. In addition to these, references should also be sought from a referencing company. In some cases, tenants may not be able to provide a reference as they may have never rented a property before in which case, they will need a guarantor to guarantee their rent or even pay the rent up front for the entire term. Any tenant unable to meet these requirements is a red flag”.
Keep a close eye on your investment capital and make sure you keep a reserve of cash to get through and downturns in the market. London property holds its value well and trends upwards over time, but there are always risks and a good London buying agent will make sure you’re aware of them.
Last in our list of six London property investment rules, make sure you have an exit strategy in place. This could be for your retirement, or in case of a family emergency, or even just a change in your investment priorities. Knowing how to sell a buy-to-let property can ensure you get the best capital gains, on top of the income generated by rental yields over the years.
Even in such a fast-paced and dynamic environment, these 6 golden rules are sure to remain timeless. But in terms of what might change as we look forward, Camilla highlights potential shifts in rental yields in London which investors will be considering. “The overall trend is that most analysts think rents will continue to rise over the next 5 years, which is good news for investors thinking of entering the market. Zoopla predicts that annual rental growth will slow, but still be 5.0 per cent by the end of 2024. The same figure is predicted by property consultancy JLL and high-end agency Knight Frank, with the latter predicting a slightly larger 5.5 per cent rise for Greater London. Hamptons anticipates a 4.0 per cent rent hike on average in 2024.”
This brief overview of London property investment includes six rules of thumb to get you started. If you want to know more, or you have any questions not covered in our Buyer’s Guide, contact Black Brick today to discuss your next prime London property investment.
We would be delighted to hear from you to discuss your own property requirements. For a non-obligatory consultation, please contact us.