What does the rental market in London mean for Buy-To-Let investors?

What does the rental market in London mean for Buy-To-Let investors?

Known for its fast-paced lifestyle, busy roads, and thousands of bars and restaurants to enjoy, London also has the largest number of tenants in the country. With over 2.7 million tenants, it has the ability to grow over time as tourism and employment opportunities are more plentiful than anywhere else in the country. Among the many options that Londoners have, there are bus stops available at almost every corner, with 9 zones available for destination trips on transport for London. While there will always be moments of tube strikes and rush hour frenzies, demand will always prevail, so more investors should seek to participate. It has been estimated that some BTL landlords have seized the opportunity and purchased one out of every ten properties (13.9%) sold throughout Great Britain in the first three months of 2022. Although investors frequently seek out the highest yielding areas of the country as a way to maximize their returns and hedge against inflation, is the ratio indicative of the demand from tenants on the edge of their seats?

A close examination of the distress caused by Covid-19 on the BTL sector will reveal that many cities were in the midst of turmoil as they were suffering from acute housing shortages and rapid population growth in crowded skyscrapers. A surge in fuel, energy, and food costs has led to the highest rate of inflation in the UK in the last 30 years. According to official figures, inflation reached 6.2% in February. Tenants who are struggling to find affordable rent may find this a difficult thought, but investors who are able to profit from such an unprecedented rise may find this an advantage. The upside of owning a house, however, is that you will not have to share your space with anyone else. A house owner can enjoy unlimited luxury, whether they are a single person and their dog, or a family of four. It can also take you a lot longer to reach your deposit if you buy a house rather than a flat. If one looks at the average house price in London which exceeds £500,000, it is evident that a large number of people still live in flats due to the inability to purchase a property in one go. The cost of managing the property can also be much higher since you will be directly responsible for it. This article will explore how purchasing a flat can be more beneficial in the long run than purchasing a property, and what that means for London BTL investors.

Rental properties are still a very common form of investment. A reverse effect has certainly occurred, considering most countries decades ago were all about buying houses and land. This was considered a status symbol once you had purchased a home. Nowadays, flats are just as lucrative and prove to have brought high returns to investors. It is possible to succeed if you have the right approach as well as the right information, which can be difficult to obtain. Property investors who are just beginning their careers tend to use a buy-to-let strategy.

The benefits of investing in flats in London

Tenures of leasehold flats

For centuries, leasehold has been a legal concept. In times of financial distress, aristocratic landowners sold off their land to merchants and factory owners for the purpose of constructing housing for their employees. Leasehold allowed the lord to retain some ownership over the land upon which the property was situated (the freehold). Leasehold properties provide more opportunities to invest in a central or highly desirable location and costs associated with maintenance are reduced. There is generally no roof or garden on a leasehold property, resulting in lower maintenance costs overall.

City of London: most desirable

With so many things to offer, London continues to be a favourite among tourists, many of whom end up moving to the city to start a new life. Renters in London are also more likely to opt for flats when seeking accommodation close to amenities and employment opportunities. Among their convenient features, buy-to-let flats are commonly found in city centres and make excellent properties for people who work in city offices, enjoy the nightlife, or wish to live near their universities. A high-life experience is increasingly sought after by these types of individuals in London, and so properties have been built in order to cater to their needs. Investing in a city centre apartment will attract a large number of prospective tenants.

Affordability

In general, good-quality flats are often less expensive than similar-sized houses, and if you decide to buy a flat as opposed to a house, your initial purchase costs will be lower. It may be possible to obtain financial incentives to purchase more than one property in a block with several buy-to-let flats for sale. The freeholder or their agent may also be able to negotiate a discount for you depending on the circumstances, so it is always worth speaking to them if you are interested in doing so.

Rental voids reduced

Having an HMO flat, for example, allows landlords to manage void periods more easily since other tenants pay their share in full, reducing the impact on their cash flow during periods of vacant occupancy. The loss of one tenant, for example, would only be a marginal amount. Since tenant demand is always rising and more tenants are in need of new accommodation, you can replace one within a short period of time.

Flexibility

When rearranging or furnishing a flat, it will take much less time since all the rooms are on one level, as opposed to doing this in a house. You could, for example, move a bed into the living room to create a larger room. This would accommodate someone who needs more space, while the other rooms are taken, and everyone is comfortable with a smaller living room for reading and studying.

There you have it, do flats still make a wise investment? Without a doubt! The market conditions for purchasing a property in London have never been better. Even after the most disruptive virus in history, which affected the economic structure worldwide, investing in real estate still stands as one of the most resilient assets of them all. As a result, you are likely to experience fewer disappointments with your investment plans. In particular, buying a flat in London is a worthy choice since it is not only the centre of overflowing work and opportunities. However, property prices are constantly rising as the economy follows and it is an opportunity not to be missed. It is also essential that you carefully consider the area where the kind of tenants you are seeking will be more likely to be found. The search for tenants should not be difficult if your property is located in a desirable area because tenants tend to consider specific areas based on their jobs, schools, and amenities nearby. Many people prefer a more modern approach to live in a flat due to its convenience and flexibility. With the help of a real-estate investing platform like us, you can invest as little as £10,000 for your buy-to-let property. It is our ongoing goal to encourage more buyers to either get back into the buy-to-let market if they have recently exited, or to dive right in if it is their first venture, and to seek out experts like us to answer any concerns or questions they have.

 

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Novyy is a Community Investing Platform that enables individuals to invest in UK Buy-To-Let, Leading Real Estate Private Equity Funds, and Premium Homes across Europe with as little as £10,000. Novyy users enjoy seamless digital investing like never before, in opportunities that were earlier unavailable to most individuals. This piece should not be construed as tax advice. Please refer to your tax advisor before making any decisions on owning properties through Limited Companies.