London buy to let opportunities

You may have dismissed the capital as being able to provide any tangible property investment opportunities due to house prices stagnating and other factors. But the buy to let market could provide an opportunity for you.

Low Supply and an Increase in Demand

The supply of rental properties in London has been dwindling since 2017 when the government announced the new taxation and mortgage relief changes. Brexit has also forced some landlords to sell up.

Demand for rental properties in the capital has always been strong and now there has been an upturn. There are nowhere near enough rental properties available to satisfy the current demand so an opportunity certainly exists here for shrewd property investors.

Across the UK the number of buy to let mortgages agreed is now 40% lower than before the government taxation changes came into play. This resulted in a number of small buy to let investors and some “accidental landlords” to get out of the market in London.

With these exits from the market came a rise in demand for rental properties in the capital. Rents have increased as a result as well. So there really is potential there for property investors that want to take advantage of the situation.

Why has the Demand Increased?

London estate agents believe that the demand for rental accommodation in London has risen for a variety of reasons. Most Londoners are not in a strong enough financial position to contemplate home ownership.

All of the uncertainty around Brexit has also had an impact. Those that can afford to buy a property in London have chosen not to until they know what the effects of Brexit will be. It is looking like they will have a long wait, with continually shifting deadlines and changes of leadership impact the Brexit process.

Estate agents in London have seen a 34% in the number of tenants registering for available properties. This will certainly mean that rents will rise again. With the limited supply of rental properties available in London there are 14 tenants fighting for each one.

London Rents Increase and Purchase Prices Decrease

With this gap in supply and demand the rents in London have increased to record highs. In the first quarter of 2019 there was a 8.2% annual increase. The average London rent is now £2,093. Further rent increases are likely as long as the supply remains limited. Savills forecast that London rents will grow by 11.5% over the next five years.

But rising rents in the capital are just part of the story. Smart property investors should be able to uncover value in the price of properties for sale. In the first quarter of 2019 London house prices were down 3.8% on the same period in 2018. House prices in the capital have fell for seven successive quarters now.

So if you are willing to look longer term you can take advantage of lower property prices and rising rents in London. Purchasing a property in the capital should always be a pretty safe investment. In the past the appreciation was quick but now you need to wait for a few years. But you will have the high rental income to keep you happy.