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Can London's buy-to-let market recover after Covid?

No one saw it coming and Covid shook the housing market to the core. In the early days, things looked uncertain but with government incentives steadying the boat, confidence stabilised and buyers and sellers remained active.

Now, many within the property sector are even looking to the future with confidence.

However, not every city made it out of Covid unscathed. You don’t need to be an expert in property investment to know that the buy-to-let market in London was a casualty of the global pandemic.

In early 2021, media articles suggested landlords were desperate to unload their London-based properties. Residents were reportedly leaving London in droves and according to estate agents, the average inner London rent fell by 15.9% (FT Jan 2021)

For landlords, the margins were getting smaller and the rental yields in London were the lowest of any major city in the UK. On top of this, the economic downturn brought on by the pandemic hit tenants hard. The numbers showed 7% of UK renters lost their jobs during the Covid downturn, compared with just 3% of homeowners with a mortgage.

Things were changing and the future was looking very bleak for London landlords.

The times are changing

Whilst the private rented sector (PRS) remains a vital component of the UK’s buy-to-let housing market due to a high demand for housing stock (but low supply), and mortgage finance for would-be home owners hard to come by, changes in tenant requirements is causing landlords to respond.

A new ‘work from home’ era means a commute is no longer as important for property location and many potential tenants are looking for larger properties, further out, and these changing demands means landlords are choosing new areas when adding to their portfolio.

According to a recent report on the buy-to-let market by Shawbrook Bank, 12% of landlords plan to make their next purchase in a different location to their other properties, and of these, 30% plan to buy in a more rural location.

Buying outside of London enables many landlords to purchase, within a similar budget, a different type of property that better matches what tenants are looking for. For example, 48% of tenants are looking for a garden and 26% want off street parking.

It is no surprise then to hear that the North- West of England, Wales and Scotland have seen dramatic increase in property sales, prices, and rental yields, as tenants (and landlords) move further away from the capital.

What does this mean for property investment in London?

It is not all doom and gloom for the London buy-to-let market. As BellPepper Investments Founder & Director Donovan Waite reminds us, London is a very large area and it all can’t be tarred with the same brush.

“It is very easy to generalize and say ‘London’ as a whole is suffering, but there are pockets that have either remained stable when it comes to buy-to-let investments and rental yields, or have even seen growth. You just need to know where to look and pay close attention to the numbers.”

It is easy to get swept away with the reports of better ROIs be heading North or even to Wales and Scotland, but for those who want to remain in London, there are still opportunities to be had.

Turning to Location Spy, the numbers show that whilst Central London remains the poorest performer, North London is the strongest riser over the past twelve months, led by Finsbury Park, and Eastern areas on the outskirts of London have been offering stable rental yields.

“This is why we created the software,” continues Donovan. “After using Location Spy to delve deeper into an area, investors can then turn to our portfolio management software to crunch the numbers for every type of property in London’s hot spots, so they can make the best property investment decisions for their individual circumstances.”

Still interested in investing in London?

Register with BellPepper now or talk to our team today.

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