What is happening in the London property market at the moment?
March 18, 2024
With the Midlands and the North-West very much in the spotlight, many of our clients are asking what’s happening in the London market. Here’s a rundown of what’s happening in the capital and the answer to the question, is now a good time to invest in London buy-to-let property?
London’s population is expanding, the city expected to house 9.8 million people by 2043, a 10% increase on its present level. Obviously, those people will need places to live. Except, herein lies the problem. The supply of new build housing in London is presently not even equipped to cope with a population increase half of what’s predicted.
London is growing but its housing supply is not
Looking at the graph below, (produced by Savills) we can see that the gulf between delivery and demand – of anywhere in the UK – is highest in London, followed by the South East. Therefore, it’s reasonable to assume that supply shortages in London and the South East will be at their most acute in the next decade. Investors need to take note of this. A healthy resurgence in London’s population (unlike NYC which is losing its people) will drive demand, yet if housing delivery cannot keep up with such demand, these are exactly the conditions that lead to stronger returns for investors, by sending prices northward.
Graph from Savills Feb 2024
London house prices are increasing
Savills have forecast London house prices to increase by 1.8% over 2024 (Knight Frank more bullish at 2%) and by 17.5% between 2025-2028 – a sharp rise over four years. With no intervention to increase supply levels, we may be looking at a sharper increase than that, as homeowners and investors compete for a narrowing pool of properties.
According to separate analyses by Savills and the FT, London built only 40% of what was needed in 2023, the delivery of new homes falling by 9% on 2022 levels.
At the same time, London remains one of the prime – if not the prime target – for property investors across the globe. Having knocked New York off the top as the world’s leading financial centre in 2024 the city is going from strength to strength. And now we’re seeing US institutional money pouring into the London property market, establishing a record Build To Rent pipeline (read Knight Frank’s appropriately titled article ( The Americans Are Back). As homeownership rates are at a record low – just 36% across Greater London, the capital is pivoting heavily towards BTR and individual investors would do well to follow suit.
London RENTS continuing to rise
Average rent across the capital rose by 6.9% in the 12 months up the end of January this year (ONS). Savills calculated rents sat 17.4% above March 2020, slightly less than the regional markets at 22.7% above the pre-pandemic benchmark, therefore showing London still has some growth to come.
A 2% increase is expected in 2024 and a 6.7% increase across the prime commuter zone by 2028. Mainstream rents across London, however, are forecasted much stronger increases – 18.2% between 2024-2028, largely because of acute supply problems.
The supply challenge, in addition to a slightly stronger economic outlook for London over the rest of the UK means we expect London rental growth to outperform by the end of our forecast period,” said a Savills research analyst.
WhAT should you buy in London?
Firstly, apartments. Our Barratt Homes scheme in North London, Hendon Waterside, completes in June 2024, therefore investors can get income earning pronto and benefit from the rental increases this year. The development is forecast to generate yields up to 6% and it’s a highly-rentable scheme, just a a five-minute walk from Hendon Station and surrounded by open water and parkland. Prices start at £392,000 – therefore putting it in firmly in the mainstream rental category, expect rental rises of over 18% by 2028.
Goldfinch Apartments, Hendon Waterside, London
If you’re looking for something a little more prime rental, our Canary Wharf development, Aspen at Consort Place starts at £550,000 and has incredible facilities to that give it the edge of other residential towers in this affluent area.
Aspen, Canary Wharf, London
WhERE should you buy in London?
We’d exercise caution with the idea of London “hot-spots” as the supply crisis extends across the entire city. Instead, in terms of location, think of the property’s proximity to a public transport connection (rail and/or Underground), the rentability of the building to either a working professional or a young family and its proximity to green space or an uplifting outdoor space (water counts!) is also a must.
Is now a good time to invest in London buy-to-let property?
Based on what we know about the supply of quality new builds versus the demand for quality new builds, we would say that yes, now is a very good time to invest in a London buy-to-let – not only from the uplift in potential passive income from rent, but also from the margin on your capital gains in investing now, in a buyer’s market.
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RICHARD BRADSTOCK
Managing Director
about the AUTHOR
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals. The RPA Group was born out of a duty of care to provide property investors with an industry-leading and integral service, one that connects investors with quality and desirable investment opportunities, whilst providing reliable and trustworthy market commentary and analysis alongside, enabling investors to make the best, most-educated decisions for them.