INVESTING IN LONDON: THE UK’S CAPITAL CITY

• GDP of GBP778 Billion, 1/4th of the UK’s Total

• Ranked “World’s Best City” (Resonance Best Cities ranking 2023)

• The Only City With Alpha++ Status Besides New York City

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London Property Investment

Sharing Alpha ++ status with only one other city in the world (New York City), London reigns as a global economic giant, crowned by the Globalization and World Cities Research Network. It is the largest and wealthiest capital city in Europe. In 2023, London’s GDP was recorded to be over GBP646 billion according to Oxford Economics, making  it a hub for international investors and businesses alike.

The economic powerhouse of London creates a significant need for housing and rentals, attracting people to the city for employment opportunities. Because of this, London has a rather notorious reputation for being the most expensive UK city to live in. 

Despite this, rental demand remains persistently high making London property investment an attractive option for international investors.According to the Zoopla index, rents in London have increased by 31% over the past two years. Our preferred Management & Lettings company, Complete Prime Residential, which manages over 2,000 units across its London portfolio, reported a 99.9% occupancy rate. Prices rose 3.7% over the same period to 2023. According to Savills, London is forecast to see a total 18.4% rental price increase over the next 4 years.

London Property Investment in a Snapshot

Population

The total number of residents living within London’s borders exceeds 9 million today and is expected to rise to over 10 million (+10%) by 2048 as recorded by Oxford Economics.

Housing Market

London suffers from the largest undersupply of homes in the UK. Savills' housing need estimates indicate that London requires 90,000- 100,000 homes annually. This economic fundamental is a strong foundation for London property investment security and propels price growth.

Economy

According to Oxford Economics, London has seen GDP Growth of 103% since 2000, with the economy expected to reach GBP1.23 Trillion (+90%) by 2040.

FIVE REASONS TO MAKE A REAL ESTATE INVESTMENT IN LONDON

London’s population growth, and vast inward investment, together with its unique and diverse economy, have created an unrivalled economic powerhouse. Below are the key reasons why London is a top market for buy-to-let investors who are looking for London property investment opportunities.

London's favourable economic climate has resulted in households becoming significantly wealthier, with disposable incomes rising. According to Oxford Economics, by 2035, household disposable incomes are forecast to reach GBP323,901.3, a remarkable increase of 108% since 2000.

The number of households in the upper-income band continues to grow and is expected to reach over 2 million by 2035, an increase of 303% since 2010. This correlates to residents being able to afford higher rents and higher mortgage rates and why the demand for property in London continued despite economic headwinds in 2022, particularly in prime central London. 

In regard to London property prices, sales of GBP5m+ properties reached their highest number for the first nine months of any year since records began in 2006, according to Savills. Prime property continues to drum up interest among the wealthiest residents and international investors seeking to have a base in the financial capital of Europe, with a predicted forecast of 13.5% growth over the next 5 years in central London.

London is by far the most populous city in Western Europe, at least twice the size of Berlin and quadruple the size of Paris. According to Oxford Economics, with an average growth of 58,275 new residents per annum over the last 10 years alone, London’s population drives a strong demand for housing. There is, however, a consistent undersupply of housing across the capital city and not just in the city centre. With the population forecasted to rise a further 10%by 2040, London may be encountering a housing crisis as it struggles to keep up with supply.

London continues to maximise the potential of every available space within the city. Regeneration projects within Greater London are listed among the most ambitious in the country. In addition to the HS2 that will shorten the distance between London and Birmingham, the Elizabeth Line project connected many hard-to-reach London locations, driving up property values upon opening in 2022. 

The Battersea Power Station project is a tasteful refurbishment of the old power station, which was operational between the 1930s and 1980s. The GBP9bn project saw the creation of a vibrant, mixed-use development, a new neighbourhood and business quarter for London, serviced by a Zone 1 extension to the London Underground Northern Line and the restoration of the Grade II* Listed Power Station, which most recently opened in 2022.

The overall project is divided into eight phases, with each designed by a range of specialist architects. These include Simpson Haugh and Partners and De Rijke Marsh Morgan (dRMM) in Circus West Village (Phase 1), Wilkinson Eyre in Battersea Power Station (Phase 2), and Foster + Partners and Gehry Partners in The Electric Boulevard, Battersea Roof Gardens and Prospect Place (Phase 3).

London has over 40 universities and other higher education institutions (HE), including four of the world’s most prestigious and highly ranked universities, LSE (London School of Economics), Imperial College, UCL (University of the City of London) and King’s College. A recent UCAS survey shows that 70% of final-year students plan to stay in the capital after graduation. With the highest graduation retention rate in the UK, London has a vastly talented and educated population of young professionals, all seeking to rent and work in the city.

London has one of the highest concentrations of the 20-29 age group in Europe, resulting in a very healthy rental market. According to Savills, despite the high cost of average rent per month in London compared to the other major cities, rents are forecasted to rise by 7.2% in the cumulative 2024-2028 period.

London’s economy has grown over 126% over the last twenty years. The combined assets from London-based firms equate to approximately GBP 8.5 trillion, cementing London’s position as a global powerhouse in finance and investment.

The city is home to the world’s fastest-growing scale-up cluster, seeing a boom of new digital, tech and creative industries setting up their headquarters in the capital city. London’s economy is expected to grow by a further 56% and reach GBP1.01 trillion by 2035 based on Oxford Economics forecasts. The city also boasts the highest GDP per capita among European cities (a representation of the standard of living) and is expected to see a total increase of 214% between 2000 and 2035.

See Our London Properties

Our Track Record For London Property Investment

Since 2009, IP Global has been active in the UK market, focusing primarily on investments in London. Our portfolio comprises 79 developments valued at over USD1.1 billion, showcasing our proficiency in navigating the property landscape. Notably, our experts have identified investment opportunities in 9 of London’s top 15 performing boroughs in terms of capital growth since 2009. Among these, Waltham Forest, Newham, Barking & Dagenham, Brent, and Lewisham have all experienced average price growth of 119% or more since September 2009. Additionally, many of our investors have realized triple-digit leveraged gains, with some reaching up to 220%, based on completed development market appraisals.

Why Invest in London Property: Market Trends and Forecasts 2023

Discover why London property is a stable and lucrative investment opportunity for 2023. Explore the historical performance, growth potential, and investment opportunities in the London property market, including the impact of Brexit.

Continue Reading

Our Latest Blog

HOW TO BUILD A REAL ESTATE EMPIRE

How do ordinary people actually become wealthy through property investment? Find out in this guide by property investment tycoon Tim Murphy and avid multi-asset investor Ian Pryor.

Tim Murphy is the founder of IP Global, which has invested over $3 billion in 45 markets on behalf of clients across the world. To create this guide, he was joined by Partner at Expat Advisory Group, Ian Pryor, to discuss the nuts and bolts of building a real estate empire from the ground up.

Frequently Asked Questions About London Property Investment

The Return on Investment (ROI) in London's property market varies widely based on several factors including the property's location, type, and market conditions at the time of purchase and sale.

  1. Capital Appreciation: Historically, London's property values have seen significant growth, although this can fluctuate with economic conditions. In the last 3 decades, the average price of flats in London has risen 472%.. Prime locations such as Central London often experience higher rates of capital appreciation - currently, they are forecast to see 8.1% capital growth over the next 5 years. 
  2. Rental Yields: The rental market in London is robust, driven by high demand for living spaces in the city. However, due to the high property prices, the yield in London is often relatively low in comparison, despite the strong demand for rental apartments. Areas with high rental demand, such as those on the outskirts or undergoing regeneration, close to universities, and transport links, can offer stronger rental yields. For example, the average yield in a location further afield like Tower Hamlets is 6%, whereas in central locations like Westminster, the average yield is currently 2.4%. 
  3. Market Trends: Current market trends greatly influence ROI. Factors such as economic stability, interest rates, housing supply and demand, and government policies (e.g. stamp duty, rental regulations) can impact both the rental market and property values. However, it's important to note that investment trends go through peaks and troughs, but the upward trajectory has been sustained over the long term. Over the last decade, London's apartment prices have increased by over 45%.
  4. Investment Type: The type of property investment—be it residential, commercial, buy-to-let, or a holiday let—also affects ROI. Each comes with different risk levels, management requirements, and income potentials.

On average, London's property market has delivered strong returns to investors over the past decades, though the exact ROI can vary year by year and region by region within the city. For precise figures, investors often look at specific postcodes or boroughs to gauge past performance and future potential.

London property prices are known for being the most expensive among major cities, but it remains a viable option for astute property investors with regeneration occurring. 

To find the best location for your London property investment, your budget and expectations must be taken into account. Rental prices in London are higher than in other parts of the UK, and the city's prime real estate market offers great potential for investors and is forecast to see the second-highest level of rental growth in the UK between 2023 and 2027.

We can provide you with a complimentary consultation with an expert so that you may receive a personalised breakdown of the investment options available to you. 

There is good news for investors looking to capitalise on investing in London. The persistent housing undersupply in the UK makes London property investment a reliable choice, with demand remaining high, which will drive up house prices in the long run.

With supply failing to keep up with the growing population's needs, this trend is expected to continue, providing a stable and profitable investment opportunity for those looking to make a real estate investment in London. Experts predict that the UK property market will deliver a strong return on investment, with average London property prices projected to increase by approximately 13.9% in the next 5 years. This makes London property investment a smart choice for investors looking to secure their financial future and build long-term wealth.

WANT TO LEARN ABOUT INVESTING IN UK PROPERTY?

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