Is London and the South East property investment still a good idea?
This is a question that I get all of the time.
Other areas of the country are seeing good growth and in many cases, higher rental yields. So does this mean that London and the South East are not viable for property investment anymore?
No, it does not!
I will give you my honest opinion on investing in property in London and the South East in this post. The capital will always be popular with property investors because so many people want to live there.
Things have changed with UK Property Investing
Things have certainly changed over the last few years. It wasn’t that long ago that London and the South East would be the first place that came to mind if you wanted to invest in property. The demand for housing was very high and house prices were always increasing.
Now things are different. Other areas of the UK offer very good opportunities in terms of lower house prices and higher rental yields. Property investors are now looking further afield for the next projects.
But not all property investors are turning their back on London and the South East. Some are still attracted to the bright lights of the capital and the surrounding areas. Overseas investors are always likely to be interested in London property investment.
London is a very important business location, and should remain so even after Brexit. It usually has a very strong economy (we don’t normally have to contend with a health pandemic). People come from far and wide to live and work in London.
And the London house prices have reflected this passion for the capital. A prime example of this is Hackney – house prices here have increased in the last 20 years by 568%. Central London has always been the prime area and even here, property prices have increased by 421% over the last two decades.
London has Different Housing Markets
If you are unfamiliar with London, it is made up of a series of small housing markets. There are 32 London boroughs and in each of these boroughs, there are “mini markets”. One area of a borough may have higher desirability than other parts for example.
Things are constantly changing in London. Areas not considered fashionable in the past are now highly desirable. The example I gave of Hackney is a prime example of this. There is a lot of investment going on in the capital right now with projects such as Crossrail. This has changed the property landscape and made some areas particularly more attractive than they used to be.
Rental prices in London are the highest in the country as you probably expected. The demand for rental property is strong in the capital and most of the time rental prices are on the rise. With the Covid-19 pandemic, there was a slight dip in rental prices this year (2020).
Unlike other major cities in the UK, London has a very high number of visitors each year as well as people that live there. Visitors are very welcome to invest in property in the capital if they want to. This leads to a bouyant London property market, not just for residential properties but commercial property as well.
If you want to find a good deal in London then you need to know what areas are best for your chosen strategy. As a rule, where the house prices are the highest the rental prices will be the highest as well. Do your homework and closely monitor what is going on in the London property market.
The South East is Vast
Outside of London, the South East has the highest property prices in the UK. According to recent HM Land Registry numbers, the average price for a house in the South East is approximately £337,000. The average house price for London is around £490,000.
House prices in the South East tend to fluctuate so it is a good idea to keep an eye on any movement. If the prices drop, even by a small amount, it could be a good time to land a great property investment deal.
You can find some areas of the South East where house prices are some way below the average. Examples of this are some of the Medway towns in Kent, Luton and Crawley in West Sussex.
Demand for private rental property in the South East is high and has been for a long time. The main reason for this is that people just can’t afford to get their foot on the property ladder due to the high property prices.
Rental prices have continued to rise in the South East as well, which is encouraging if you are in the buy to let market. This year there has been a slight dip due to the coronavirus pandemic (this affected London rents too), but with the vaccine hitting the UK now there should be an upturn again.
Many people commute into London from the South East as London house prices are out of reach for them. So you can always expect the demand for housing to be high. This is true for those that want to purchase a property in the South East and those that want to rent.
Some areas of the South East have higher rental yields than others. Changes are happening in different areas, which will affect the prices for houses and rents. Slough in Berkshire has always been a good performer when it comes to house prices and rental yields. This should continue, as the planned Crossrail route will make it a more attractive place to live.
Oxford is another famous city in the South East, which has high desirability. The council have launched a Strategic Economic Plan for the creation of around 24,000 jobs and 28,000 new properties in the city. There are also transport improvements planned.
There are similar stories all around the South East so it is always a good idea to keep your ear to the ground. The Medway Towns in Kent, Swindon in Wiltshire and Bracknell in Berkshire are all examples of where there are plans for growth over the next few years.
London and the South East Property Investment is still a good idea
In my opinion, you should not dismiss the idea of investing in property in London and the South East altogether. Both of these areas will always be popular places to live in the UK if you make the right moves then there is still a favourable risk/reward ratio.
Many people live in the South East and commute into London for work because they cannot afford either the house prices or rent prices in the capital or because they prefer to live away from the city. This is unlikely to change that much as there is still a high level of business activity in London.
Nobody knows the impact that Brexit will have on London and the South East or the UK as a whole. It is probably not going to be as bad as some of the “gloom and doom” merchants predict. London has survived recessions before, and will continue to do so.
It may all come down to the amount of money you are prepared to invest, or what your budget will allow. House prices in London and the South East are higher than elsewhere so this could prohibit you from making an investment right now.
If you are going to invest in property in London or the South East then I recommend you adopt a long-term strategy here. Finding investment opportunities for a quick return may be very difficult but certainly not impossible. With a longer-term strategy you will have more chance of riding the waves that will inevitably appear.