London: Investing In The UK’s Capital City

GDP of GBP598 Billion, 1/4th of the UK’s total

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

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. The Globalization and World Cities Research Network crowned London with the accolade, recognising the capital as a primary node within the global economic network. As such, London is the largest and wealthiest capital city in Western Europe. In 2021, London’s GDP was recorded to be over GBP 2.2 trillion, outperforming all of Europe’s capital cities, making it a very attractive location for international investors and businesses alike.

London is widely regarded as the most global financial centre. Over 400,000 residents are employed in the finance and insurance industry, and another 100,000 in wholesale banking. London is also a renowned city of culture, with its famous West End theatres showcasing some of the best live theatrical performances in the world. In 2019, 15.3 million theatre tickets were sold across the city, beating the likes of Broadway in New York by more than half a million ticket sales. London is also one of the most visited cities in the worldremaining in the capital for the duration of their visit, with. While the entertainment industry took a colossal hit during the COVID-19 pandemic, the reopening of theatres is set to return London to the spotlight as the top destination for international visitors.

London’s economic hub generates a huge demand for housing and rentals as residents continue to be drawn to the city for work. 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, having seen 14% growth in 2022. According to Savills, mainstream rental prices are forecasted to grow by 31.9% between 2022 and 2026. Residents are being drawn back to the city after the race for space during the COVID-19 pandemic, making London a viable option for buy-to-let investors, especially those searching for low void periods. Our preferred Management & Lettings company, Complete Prime Residential, manages over 2,000 units across their portfolio and reported a 99.9% occupancy rate in London in 2023.

London 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 (+11%) by 2035.

Property Market

London suffers from the largest undersupply of homes in the UK. By 2029, its housing deficit will be over one million units. This economic fundamental is a strong foundation for investment security and propels price growth.

Economy

London has seen GDP Growth of 126% since 2000, with the economy expected to reach £954bn (+92%) by 2035.

Five Reasons to Invest in London

London’s population growth, 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.

The City of London provides employment for approximately 400,000 employees. With the furlough scheme now lifted and employment levels stabilised, London’s unemployment rate has dropped to 3.7% as of January 2023. Compared with the rise in 2021, the unemployment rate is forecast to drop further over the next few years.

London's favourable economic climate has resulted in households becoming significantly wealthier, with disposable incomes rising. By 2035, disposable incomes are forecast to reach £113,840, a remarkable increase of 203% since 2000. London has been classified as the ‘World City’ for High-Net-Worth and Ultra-High-Net-Worth Individuals and is currently ranked 7th in the world for the number of billionaire residents.

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. Sales of £5m+ 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. With an average growth of 70,537 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 11% over the next five years, 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 list among the most ambitious in the country. In addition to the HS2 that will shorten the distance between London and the rest of the country, the Elizabeth line project connected many hard-to-reach London locations driving up property values upon opening in 2022. The Elizabeth Line is Europe’s largest construction project, with 42 km of new tunnels and 10 new stations. The tube line broadens the boundaries, linking Reading, Maidenhead, Slough, Romford and Shenfield to the city centre.

The Battersea Power Station project is a thoughtful refurbishment of the old power station, which was operational between the 1930s and 1980s. The £9bn project will see 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 SimpsonHaugh and Partners and De Rijke Marsh Morgan (dRMM) in Circus West Village (Phase 1), WilkinsonEyre in Battersea Power Station (Phase 2), and Foster + Partners and Gehry Partners in The Electric Boulevard, Battersea Roof Gardens and Prospect Place, (Phase 3).

As of 2019, there were 382,000 Higher Education students studying and living in the city. 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 31.9% in the cumulative 2022-2026 period.

London’s economy has grown over 126% over the last twenty years, outperforming its fellow Alpha ++ city, New York. 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. With a hive of talented and educated workers, businesses continue to grow and thrive. London’s economy is expected to grow by a further 92% and reach GBP 954 billion by 2035. 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.

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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.

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FAQs

Yes, the COVID-19 pandemic caused a shift in the London property market, with an initial short period of stagnant growth followed by an exceptional surge in demand. This was largely due to a stamp duty holiday and a focus on property preferences during lockdown, with many opting for larger homes with gardens and office space outside of central London. Interestingly, house prices grew 20% during the pandemic and forecasts predict steady future growth.

While London is known for having the most expensive property prices among major cities, it remains a viable option for astute property investors with regeneration occuring. The Battersea regeneration project, for instance, presents exciting prospects with the development of new residential units and office floor space as well as new connections to the Northern line increasing the value of the area surrounding it.

To find the best location for your 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. Click here to get in touch.

As we come out on the other side of the pandemic, there is good news for investors looking to capitalise on the UK's property market. The persistent housing undersupply in the UK makes 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 enter the market. In fact, experts predict that the UK property market will deliver a strong return on investment, with average house prices projected to increase by approximately 45% between 2022 and 2035. This makes UK property a smart choice for investors looking to secure their financial future and build long-term wealth.

Our properties in London

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The Solarium

LondonUK

Set in Brentford, London’s hub of regeneration, you’ll find our latest investment: The Solarium. Aptly-named, the glass-clad...

From gbp 380,000

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SOLD OUT

Spa Road

LondonUK

Bermondsey is located in the Borough of Southwark in the specific regeneration zone. Spa Road has the...

From gbp 307,000

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