With a thriving arts and performing scene, huge culinary demand, and a retail industry that is going strong, Why invest in London is a widely asked question. London is the most visited city and the most fascinating cosmopolitan in the world. The historic architecture of London dates back more than two millennia. London is among the world’s most desirable cities for various reasons, including its rich history, enviable way of life, improved prospects for professional advancement, and much more. Given its high demand and bright economic future, investors worldwide are eyeing London as a potential location for investment.
London – The superlative of diversification
London boasts a thriving and vibrant performing arts culture, a great demand for scrumptious cuisines and diverse tastes of culinary, and a strong retail industry. A perfect utopia for the biggest companies in the world, the headquarters of some renowned business giants, including HSBC, Aviva, GlaxoSmithKline, Unilever, and BP are present in London.
Twice as big as Berlin, this glitzy and gleaming cosmopolitan is one of the biggest capital cities in Europe. It’s hardly surprising that such sizable corporations are locating in the city, given the high population density. Once you set foot on London’s streets, you’ll quickly realise what a true melting pot of cultures it is. Since there are so many job prospects, you can still obtain employment even if English isn’t your first language. Knowing a second language can be helpful because the capital city is home to numerous multinational firms.
Since there are thought to be 270 distinct ethnicities and 300 different languages among the population, you must not be concerned about feeling out of place in London. The diversity of the city’s population will allow you to broaden your cultural understanding and interact with people from other countries. With so many foreign businesses setting up shop in London, you have the chance to advance both metaphorically and literally in your career. Working for a multinational company that you initially discovered in London may give you the opportunity to travel the world.
Why Invest in London?
London, the thriving metropolis, is known for the inception and delivery of more investment opportunities and prospects with every sunrise. As a result, people frequently search London for intriguing investment opportunities with high returns. London is not only the mere capital of the United Kingdom but also a heavily populated, multi-ethnic city with residents from over 270 different countries (as previously stated). Housing demand is mostly high in this area due to the rising population, so investing in London houses is a wise choice.
London surpassed rival cities like Paris and Berlin to be named the best European city for real estate investment. This is because they can offer real estate investments that are more cost-effective, allowing investors to receive bigger returns on their property investments. Here are some reasons why London real estate appeals to investors and you must invest in London.
Good city to live in
With a diversified, multiracial population, a constantly expanding economy, a mind-blowing infrastructure and technological advancement, London stands among the glitzy, vibrant metropolises desires to live. This metropolitan has always been an eye candy, a focal point of attraction and a top destination for foreign investment. Global investors make money in the long run via rent or resale.
Flawlessly developed infrastructure
London’s strong infrastructure is a major benefit for real estate investors. The city has unmatched transportation options, including five international airports and the well-known London tube system. Beyond connectivity, London is the home of many globally renowned business giants. More than 30% of London is covered in green space, and about 60% of the city is open even though it is highly inhabited.
A centre of attraction for commercial real estate
If you are planning on investing in properties for sale in London, then commercial real estate has some attractive prospects for you. Profiting from London’s strong allure for businesses, investors from all over the world select London as their preferred location for looking for commercial real estate. In fact, according to property agents in London, the city has been ranked first in the world for commercial real estate, attracting investments totalling almost £16.2 billion. This was more than the famous cities of Manhattan (£14.3 billion), Paris (£12.1 billion), and Hong Kong (£8.4 billion), for comparison.
Most intriguingly, according to the estate agents in London, commercial real estate investment is “exceeding forecasts” in 2021, despite the effects of Covid-19 and Brexit. Commercial real estate investments in London are quite lucrative compared to those in other European cities because of the sizeable degree of foreign investment. Chinese investors alone endowed almost £3.69 billion on commercial real estate in London in 2017. Therefore, this is another reason why you must invest in London.
Massive regeneration in London
London draws the majority of UK inward investment, which has significantly sparked regeneration in the city. Since London hosted the 2012 Summer Olympics, many transformational initiatives have aided the city in maintaining its economic dominance on the global stage.
The following upcoming redevelopment initiatives in the city are perhaps the largest:
- Thamesmead – A 30-year master plan for the neighbourhood of Thamesmead. The project includes eight thousand new houses, 4,000 new jobs, and renovations to 5 km of riverbank and 7 km of canals.
- Battersea Power Station – It is a globally known, historic landmark, which was once used to provide electricity to London. The Grade II listed building is massively transformed into a lifestyle destination that offers exceptional residential units, business centres, corporate offices, entertainment spaces, restaurants and high-end retail units in South West London, along River Thames.
- Old Oak Common and Park Royal – A £26 billion project will include a £3 billion Imperial College, a brand-new high street, and a transportation super-hub.
- Crossrail, a £14.8 billion upgrade of London’s rail infrastructure, will provide 118 km of new rail track and is projected to generate £20 billion in economic growth for the UK.
According to property agents in London, the most major project is Crossrail, as it will increase tenant demand throughout the South of England. Included are commuter towns like Slough, where places close to the new Crossrail links have experienced a more than 60% housing price surge.
The previous five years have seen the growth of areas like Hayes and Southall thanks to this flourishing enterprise. These two neighbourhoods were untapped financial treasures that surfaced when the Crossrail project got underway. The availability of inexpensive homes has encouraged significant investment, and being close to Heathrow Airport is also viewed favourably. Southall is home to a picturesque section of the Grand Union Canal, an intriguingly diversified food culture, and a high street bursting with colour.
Ealing, closer to London, has long been a favourite among those in the media and other creative fields. The cost of investing here is higher, yet new construction is adjacent to renowned schools and historic parks in Hammersmith. The area surrounding the major rail terminus in Paddington, which serves as the entrance to the West End, has undergone a complete makeover. The property agents in London believe that many people will be eager to take advantage of the life-affirming joy of walking to work along the canal from here or up to Little Venice.
Continuously rising demand
Rental housing is in more demand when employment rates rise. Increased employment means that many more people are looking for properties in London for long and medium-term leases. Young professionals are increasingly choosing to get a property on rent rather than buy a home, and there are tremendous chances for short-term rental housing due to the ever-growing number of tourists—one of the world’s largest financial centres in London. The city has traditionally drawn people with a variety of specialities. There is a constant need for more homes due to the growing population. Consequently, purchasing real estate in London is a profitable investment.
Excellent rental yields
London now ranks as the 10th best region in the UK for property investors, with an average rental yield of 4.1%. Compared to the rental yields possible in the East of England and the East Midlands, it outperforms the South West of England. Despite high property prices and slower home price rises than some other locations of the UK, it is one of the best places to invest due to the enormous demand for both long- and short-term rental properties. In most of London’s neighbourhoods, rents are growing in conjunction with home prices.
The London Borough of Kensington and Chelsea currently has the highest average rent in Greater London, at £2535 a month. Westminster, the City of London, and Camden are close behind. The lowest rentals are found in Sutton, Barking, Dagenham, and Bexley, all of which average under £1200 per month.
Exceptional capital appreciation
Since the COVID-19 induced global pandemic, the housing market in London has largely recovered. The average home in London now costs £530,000 as of July 2022, an increase of 7.9% over the average house price in April 2022. Those purchasing real estate in London can profit from quick capital appreciation due to the ongoing increase in property prices. London has one of the highest costs of livings in the world. Thus the capital growth is significant.
The rental yields are still substantial and lucrative throughout the city, even though investors have a wide choice of metropolitan and suburban areas to choose from. This results primarily from the strong demand. So you have an opportunity to make a substantial profit on a well-researched property investment in London.
Investor-friendly tax payments
To invest in London real estate, you must familiarise yourself with the taxes and costs involved. You will be charged income tax, capital gains tax, stamp duty and inheritance tax if you invest in London. Property investors should consult a knowledgeable tax specialist for further information on their tax obligations and regulations relating to rental income and the sale of investment properties in London.
Stamp Duty Land Tax – When people purchase a freehold or leasehold property, a home in a shared ownership scheme, or a property in any other way, such as by taking out a mortgage, UK property owners are subject to Stamp Duty Land Tax. Different rates apply depending on whether you are a first-time buyer, a resident of the UK, or a repeat homeowner.
Income Tax – Like most people in the UK, landlords must pay income tax, ranging from 20% to 45%. Investors will not be taxed on the first £1000 of their property income; the remaining funds will be subject to income taxes.
Capital Gains Tax – When investors sell a home that is not their primary residence, they may also be subject to capital gains tax from the UK and other countries. Any income from a buy-to-let investment, whether rental income or the asset itself, is subject to inheritance tax at 40% upon death, assuming they do not qualify for any exemptions. For more details, consult estate agents in London.
The favourable and investor-friendly tax payments are another reason you must invest in London.
Transparency in London real estate market
One of the most sought-after investment markets worldwide is the property market in London. It offers a safe, stable, and secure sanctuary to conduct business because it is mostly insulated from changes in the world markets. The UK government’s regulatory authority has created a simple and practical structure for investors to maintain market transparency. No restrictions exist on owning real estate anywhere in London, and all the necessary data and information are readily available.
Best areas to invest in London
If you are planning to invest in London, there are a few areas to consider. However, remember that this list is not exhaustive.
Tottenham – Because it is known for being the home of the illustrious football team, Tottenham Hotspurs, this significant town in north London is a noteworthy investment opportunity for 2022. The construction of more apartments at Tottenham Hale is planned. And by the end of the following year, Tottenham Hale’s ambitious station renovation is anticipated to be finished. The property market in Tottenham has risen more slowly than the rest of Haringey, leaving plenty of space for exceptional returns on investment despite the city’s superb rail and transportation connections.
Chadwell Heath – With more open space and bigger homes, Chadwell Heath resembles a suburban neighbourhood more than many other areas outside of London. Just two miles from Romford, Chadwell Heath offers affordable homes, convenient access to transportation, fantastic shops, and a wide range of recreational options.
Bloomsbury – If money is not a concern and you want to be in the thick of things, Bloomsbury might be the place for you. Bloomsbury is easily accessible from practically every area of London because of its excellent location close to the Piccadilly, Metropolitan, Circle, Hammersmith & City, and Northern Line stations.
Predictions for London real estate sector
London continues to be a popular destination for investors looking to purchase real estate, despite having lagged behind the rest of the UK in recent years in terms of the price increase. From 2022 to 2026, the price of real estate in London is expected to increase by 23.5%, driven by both rising optimism and a shortage of available dwellings. While housing construction struggles to build the 90,000 to 100,000 new homes needed yearly to meet demand (only 41,718 completions were recorded in London during the 2019/20 timeframe), rents in London are expected to rise by 19% between 2020 and 2025 (excluding brand-new homes).
Although London’s average yield is lower than that of places like Manchester because of the difficulty in getting a high enough rental from the typical tenant to cover costs due to the city’s rapid house price growth over the past ten years, capital growth still accounts for a significant portion of why investors choose to invest in London. Statistics reveal that, during 25 years, London recorded the second-highest cumulative price gain, after the S&P 500, among equities, gold, and real estate in other cities.
Even though the S&P5 500 has performed well, investors would feel comfortable taking out loans for real estate provided that steady rentals can cover the interest expense. Therefore, given the multiplication effect of leverage, the actual returns when you invest in London would be substantially higher.
The appropriate property in the right place is the key. Affordability is a crucial element that investors should pay attention to, even though there is still room for a price rise in regions like prime central London, which is below its price peak from 2014. Therefore, it would be more profitable and rewarding to invest in the less expensive outside zones than in prime downtown London.
It’s evident that London property prices are beginning to rise again after a period of stagnant growth. If you’re considering making an investment in the city, East is undoubtedly the finest region for value. Some investors are taking advantage of the current London real estate market and are planning to invest in London now before it increases further because interest rates have increased to 1%.
