We all know that rent in London can cost you a small (or large) fortune depending on the area you live in, and Southerners in general are relentlessly berated by anyone north of Luton for the laughable cost of living they put up with. And it seems that Londoners aren’t too phased by this as new figures suggest that with the end of lockdown restrictions and people returning to their offices in the capital, rents have increased by 12.3%. Great news for landlords.
How Much is London Rent?
For a one bed flat in West London’s affluent area of Chelsea, you could be looking at a minimum of £2,500 a month with some properties as much as £6,000 a month. To put that into perspective, for the same amount of money (£2,500), you could rent a 5-bedroom detached house in Leicestershire, a 4 -bedroom semi-detached house in Oxfordshire, and a 4-bedroom detached seaside cottage in Devon.
Sounds unbelievable that people would pay so much for such a small property, right? Well, ask any Londoner why they do it and the most common answer is it’s the experience of living in London that you pay for, not necessarily the property. For people who thrive off big cities, hustle and bustle, and the excitement of the Capital, it’s this mentality that keeps them coming back and it is exactly why owning and letting out property in London is such a lucrative business.
How Has London Rent Changed Over the Last Year?
Property research company Hamptons (Part of Connells), the largest property service group in the UK, have released figures from their letting index that show rents in London have increased by 12.3% over the last year. They put this down primarily to people returning to London and their office-based jobs after an almost 2-year period of working from home and/or furlough caused by the Coronavirus pandemic.
The index figures show that 30% of all new property tenancies in the capital so far this year have been secured by someone moving from outside of London back into the city, which has increased from only 12% in 2020.
Surprisingly, 65% of these movers have moved to inner and Central London this year, which has significantly increased from the usual 50/50 Inner and Outer London split. Becky Bellamy, writing for mortgage news website mortgage strategy qualifies this data by saying: ‘In terms of rental growth, the cost of a newly let home increased 9.8% over the last month to £1,125 per calendar month (pcm), marking the fastest level of growth since the index began in 2013. The record rise signalled that just over half of all rental growth recorded during the last five years across Great Britain has come within the last 12 months.’
Should I Own and Let Out a London Rental Property?
Undoubtedly owning property in London has been and always will be a cash cow in the sense that people are paying and will pay above the normal odds for a home in the capital. We can see from the 12.3% rise in the last year that there is no slowing down in the rental market and people are actively returning to pre pandemic life.
Now, of course, owning a property or multiple properties in London is not cheap and because of the competitiveness of the market, you will need to have some serious capital behind you to buy a property in the first place but as long as you find the right property, invest enough money into it, use a professional and knowledgeable buy-to-let mortgage broker (if you need a mortgage) to help you secure the best mortgage rates and product, and finally find the right tenant, your investment will pay very healthy dividends.
What Do the Buy-to-Let Mortgage Experts Say About London Rent?
Content and communications manager at Oportfolio Mortgages in London Louis Mason had this to say:
“Now is a great time to buy property in London. Yes, it’s expensive, yes you will need to invest a large amount into purchasing the property, but it is clear from these figures released by Hamptons that the demand is there, and you will receive a good amount of rent so that you can turn your investment in to a healthy income source.
As buy-to-let mortgage specialists and more importantly specialists London mortgage brokers we know exactly what you need to do so that your investment makes sense. Whether that’s helping you to get your first Buy-to-Let mortgage on a property or helping you to remortgage your existing rental homes so that you are on a more beneficial product, we are passionate about making sure you get the most out of your mortgage.”
If you or someone you know is thinking about investing in a rental property in London or perhaps already has a rental property and wants to see how Oportfolio can help you to re-structure your portfolio, please feel free to give our friendly mortgage team a call today.