Buy to Let Investment and Average Property Prices by London Borough

Much has been said about the long-term benefits and profitability of investment in London real estate, and there are many examples showing that these are not just hollow words.

So, is it really profitable to buy property in London?

The residential rental market in London has been, and remains to be, very busy. The reason lies in the fact that the average price of a property in London currently stands at £534,785, and one could therefore conclude that this average price level would be a fairly typical price choice of middle class buyers. However, the average annual salary in London of £34,346 makes it problematic. Of course, there is a possibility to consider mortgage lending, but it is also not an easy option.  As practice shows, the maximum amount of a mortgage loan is usually about 4 times the amount of the annual income, and it is rare to obtain a mortgage in the amount exceeding 80% of the property value. As it turns out, the middle class buyers have relatively small chance to buy average-priced property in London, and for Londoners earning below the average salary in the capital this chance is scarily close to non-existent.  This situation, in turn, creates high demand for rental properties.

According to the Land Registry data, as a general picture property prices in London keep raising. The highest price growth of 19% to 20.8% among London boroughs is noted in the developing areas of the capital. The leaders of annual price increase are currently boroughs of  Bexley, Croydon, Haringey, Havering, Hillingdon, Newham, Redbridge and Waltham Forest. In 3 central London  boroughs  of Camden, Hammersmith and Fulham, Kensington and Chelsea prices actually declined. They will, with no doubt, recover in a due course and move into positive price increase progression, however, beating price changes of developing London boroughs will still be out of question in the foreseeable future, so buyers not limited by specific location and expecting higher financial return shall still keep looking into less well-known, developing areas of the capital.

The highest number of sales according to the latest data was recorded in Bromley and Croydon. First time buyers still tend to buy cheaper properties than former owners, however number of first-time buyers increased by 12% over the last year, which is a positive move.

As one may expect, cash buyers in London still buy more expensive properties than buyers financing their new home through the mortgage, with difference in price currently standing at around £33,000.

The following table provides an overview of the different boroughs of London, average property price in each area, annual change in property prices, and the average rents.

London Borough 2016 average price 2015 average price Price Difference (2016 to 2015) Average monthly rent Annual ROI (%)
Barking and Dagenham £276,145 £235,702 17.20% £1,099.00 4.78
Barnet £542,389 £470,262 15.30% £1,669.00 3.69
Bexley £328,107 £275,330 19.20% £1,036.00 3.79
Brent £499,514 £438,513 13.90% £1,584.00 3.81
Bromley £440,373 £384,313 14.60% £1,241.00 3.38
Camden £788,065 £793,213 -0.60% £2,285.00 3.48
City of London £886,713 £779,097 13.80% £2,249.00 3.04
City of Westminster £1,029,884 £958,776 7.40% £2,956.00 3.44
Croydon £365,479 £306,206 19.40% £1,102.00 3.62
Ealing £497,044 £439,529 13.10% £1,458.00 3.52
Enfield £388,151 £335,381 15.70% £1,260.00 3.90
Greenwich £387,336 £338,279 14.50% £1,342.00 4.16
Hackney £541,914 £519,469 4.30% £1,773.00 3.93
Hammersmith and Fulham £760,245 £772,832 -1.60% £1,886.00 2.98
Haringey £569,376 £473,659 20.20% £1,523.00 3.21
Harrow £451,643 £406,672 11.10% £1,370.00 3.64
Havering £348,973 £291,467 19.70% £1,027.00 3.53
Hillingdon £417,684 £348,922 19.70% £1,194.00 3.43
Hounslow £401,957 £354,912 13.30% £1,659.00 4.95
Islington £683,349 £646,180 5.80% £1,941.00 3.41
Kensington And Chelsea £1,287,850 £1,328,276 -3.00% £3,215.00 3.00
Kingston upon Thames £500,730 £434,523 15.20% £1,453.00 3.48
Lambeth £527,419 £484,640 8.80% £1,690.00 3.85
Lewisham £421,155 £357,304 17.90% £1,242.00 3.54
Merton £526,216 £464,605 13.30% £1,625.00 3.71
Newham £359,231 £297,453 20.80% £1,314.00 4.39
Redbridge £409,025 £342,833 19.30% £1,199.00 3.52
Richmond upon Thames £685,448 £614,134 11.60% £2,036.00 3.56
Southwark £519,781 £475,937 9.20% £1,600.00 3.69
Sutton £376,410 £323,505 16.40% £1,119.00 3.57
Tower Hamlets £468,484 £426,684 9.80% £1,733.00 4.44
Waltham Forest £424,824 £355,647 19.50% £1,230.00 3.47
Wandsworth £621,220 £568,399 9.30% £1,889.00 3.65

 

As can be seen from the above table, the average ROI (Return on Investment) is 3 to 4%, with 5 boroughs currently exceeding 4% mark.

In 14 boroughs of London the amount of annual rent still does not exceed £17,000, which gives middle class Londoners the opportunity to spend less than half of their income on rent.

In 23 of these boroughs, the annual rising cost of properties for the last 12 months has exceeded 10%.

With both property prices and rents continuing to raise, a smartly chosen borough and a type of the property will be a profitable investment in the long-run, and a safe preservation of wealth with stable capital growth.

This information is only an overview of the real estate market, and, of course, does not include all the details that should be taken into consideration when deciding on a property to purchase. Law Firm Limited would be happy to assist with selecting properties according to your individual criteria, based on your budget, investment goals, duration of the investment project, and other factors.

You can always contact us by telephone on +44 (0)20 7907 1460 or via email to request detailed information about the properties, arrange a viewing, or ask questions.

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