Landlords in London are always waiting for the right time to buy their next property. It is always a difficult decision, whether you are in search of a new home, or a new Buy-To-Let opportunity. We never know when the right time is.
The truth: London is one of the most lucrative cities in the world when it comes to property investment. With so many investment opportunities available, you may be wondering whether buy-to-let properties are worth the investment in 2023, especially in London.
We believe it could be – depending on what you are looking for from property investment.
Here are five reasons why we believe investing in buy-to-let properties in London is a smart move for landlords this year:
1. There’s a significant shortage of rental stock
Rents have rose constantly over the past couple of years, for the simple reason that there is a considerable amount of demand from tenants and simply not enough accommodation available. London has a population of over 8 million people, with thousands of new residents moving to the city every year. As the city’s population grows, the demand for rental properties is also increasing. This means that landlords who invest in buy-to-let properties in 2023 will be able to find tenants who are willing to pay a premium for high-quality rental properties. This also means you can expect smaller void periods, minimising your outgoings and increasing your returns.
Nevertheless, it’s still crucial that you research supply and demand in your area to ensure that the property you buy will be a good investment. Tenant types can vary enormously from one part of a town or city to another, so work with local experts, to ensure you minimise your potential risk, and are able buy your new property with confidence.
2. A slowing market can create opportunities to pick up a bargain
Some buyers get nervous when property price growth slows, especially with media news that there may be a ‘crash’ on the way. That could be because sellers may be struggling to pay higher mortgage rates or need to get hold of the equity that’s tied up in their home; we never know the reason a specific property is up for sale.
If you can offer them a quick deal that enables them to get on with their lives, that gives you some bargaining power. Whatever discount you get translates to instant equity in the property and can improve the property’s income returns too.
3. More Landlords are exiting the market in 2023
In recent years, a lot of regulations have been put in place to scare Landlords, making it more difficult to rent out a property than before. More and more Landlords are exiting the market, offering you opportunities to buy with ‘instant cash flow.’.
While some landlords are selling up because of the legislative and tax changes that have affected buy-to-let over recent years, others have reached the end of their investment strategy and had always planned to sell around now.
Buying a property that’s up to scratch from a legal letting perspective with sitting tenants means you don’t have to invest any capital in getting it ‘ready to rent’ and could get rental profit from the first month of ownership, giving you less headache and better returns.
4. High rental yields and potential for capital appreciation
London is known for its high rental yields, and investing in buy-to-let properties can offer landlords a significant return on investment. The average rental yield in London is around 4% to 5%, which is much higher than other investment options such as bonds or stocks. This means that landlords can earn a substantial return on their investment while also enjoying the security of owning a property.
Despite the economic challenges faced in recent years, London's property market remains stable. This is due to the high demand for rental properties in the city, which helps to maintain property prices and prevent them from falling. By investing in buy-to-let properties in 2023, landlords can enjoy the peace of mind of knowing that their investment is secure, even in uncertain times.
investing in buy-to-let properties in London also offers the potential for capital appreciation. London's property market is known for its strong appreciation, which means that the value of your property is likely to increase over time. This not only provides landlords with a steady stream of rental income but also the potential for a significant return on their investment when they decide to sell their property.
5. You can get ahead of upcoming legislation
The Government finally published its long-awaited White Paper, ‘A Fairer Private Rented Sector’ last June – which includes proposals for new tenancies to have a minimum ‘C’ EPC rating in the next couple of years - we can expect regulation of the private rented sector to tighten.
Knowing about potential upcoming changes gives you a chance to buy something now that is already compliant with those proposals or carry out any necessary works before you bring the property to the lettings market.
Unfortunately, EPC and EICR legislation is in place and Landlords must conform to them. That doesn’t mean you will be losing out on a successful investment and good returns.
As with any purchase, it’s essential to make sure any offer you make is affordable, and there shouldn’t be any problem securing a mortgage.
