Cons.....
1. Competition
Competition in some popular areas can be tough, with luxury properties and fantastic amenities attracting guests. You will need to make your investment attractive to get high occupancy and charge higher nightly rents.
2. Seasonality
Although all seasons can see holiday makers and then the very best holiday lets can also see a high occupancy all year the truth is that of course the summer is going to see a higher occupancy rate, as well as the opportunity to charge higher nightly rates.
3. Property Updates
You will need to keep your property up to date with all the expected luxuries and mod-cons of modern living, modern TVs, modern décor and fresh clean furnishings. This can incur high costs. Guests may also expect something grander than their own homes, so this means hot-tubs, high end garden furniture etc.
4. Bills
As the owner you or your management company are responsible for all bills, so internet, gas, electricity etc… whereas long term lets tenants can be responsible for this themselves.
5. Management company
It would be highly recommended that you do not manage these investments yourself as they can be a full-time job if you own multiple. For this reason, management companies will charge a much higher rate than traditional BTL property.
6. Local council ban
Some areas have banned the allowance of running a property as a short term let/ holiday home. This is more of an entry issue, if you can overcome this then you should be fine.
7. Mortgages
Some finance providers will not offer mortgages on short-term let properties, this means you will need to make as a cash purchase. However, again this is an entry requirement and financing can still be found, so overcoming this is still achievable.
What are the best UK locations for Investing in Holiday Buy-to-let
The locations for a staycation in the UK are no secret to any Brit, but if you’re an overseas investor you may not have heard of many areas where Brits like to stay, as it is not the same as international visitors who may choose to see the sites of somewhere like London.
Heathside
London
999 yr Leasehold
- Completing Q4 2023
- Extensive Amenities
- Studios, 1 & 2 beds
Prices From £405,927
London a city to do business and work
London is an utmost city to do the business and its “fundamental strengths as a global financial centre remains. London’s financial and professional services are recognised for their openness, global connections, culture of collaboration, and access to capital, clients and collaborators.”
Over the years London has successfully adapted to global trends which are affecting how we live, work and socialise, which in turn influences long-term international real estate investors when allocating their capital. Investors have favoured London for its excellent global position and ability to harness future economic growth opportunities. London today attracts an increasing share of global capital flows from real estate investors looking for income and wealth preservation. By supporting knowledge and creative industries with focus on sustainability and wellbeing, London is well positioned to attract capital which is incorporating the principles of Environmental, Social and Governance (ESG) in investment portfolios.
Ranked joint second with New York in the Global Startup Ecosystems chart, London’s tech ecosystem is valued at $142bn, above the global average. London is the tech unicorn capital of Europe, adding 20 new unicorns to its ranks in 2021, more than in any other previous 12-month period. Having raised $25.5bn in investment in 2021, the London tech investment levels were higher than financing made up of Berlin, Paris and Amsterdam combined.
London offers an impressive environment with a brilliant network of stakeholders involved in its urban development and is home to major landlords, investors, developers and architectural firms also having their European head offices in the Capital. $29.3bn – is the estimated amount invested into the London real estate market between Q4 2020 and Q3 2021 with the total value of London’s homes standing at £2.4 trillion.
London’s population is set to grow from 8.9 million (2021) to around 10.8 million by 2041. As it does so, employment is expected to increase on average by 49,000 jobs each year, reaching 6.9 million over the same period.
London a city to live
“You find no man, at all intellectual, who is willing to leave London. No, Sir, when a man is tired of London, he is tired of life; for there is in London all that life can afford.” This is one of most quoted deliberations about the joys of living in London, and it is by Samuel Johnson, a great literary figure of eighteenth-century England. At the time of Dr Johnson’s life, London was the biggest city in Europe.
Still by far the biggest city in western Europe, London is also one the most frequently voted No 1 World cities to live in. Even during crises such as the recent pandemic, London managed to score top in many surveys including this one from the Global Finance in 2022 who declared that “London's strength in culture, accessibility, and surprisingly strong population growth pushed it above and beyond every other city in the world.”
Cosmopolitan and diverse, London is home to some 9 million citizens who speak 233 different languages and have English as the common and universal method of communicating. One third of London is green with over 8 million trees and the impressive amount of exceptional green spaces per head of population that puts it in the top 10 cities of the world. There are over 150 parks and gardens in London. The Capital also has four UNESCO World Heritage sites. In 2019 London became the World’s first National Park City committing its resources to protecting and enhancing its living landscape.
London’s culture: If there is one place on the Earth where the culture flows in a perpetual motion and covers every aspect of daily life, then it’s London. There are over 800 art galleries, 190 museums, 350 music venues, theatres, exhibition centres, countless live events and festivals. The vibrant city lifestyle is supported by well-established, world-famous music venues, award winning restaurants, bars and pubs.
According to the IESE Cities in Motion Index and the smart city category, London is part of the big ten again.
One of the biggest challenges London has been set to achieve by 2030 is its Carbon zero city status. It means that 80 per cent of London journeys will be walking, cycling or taken via public transport by 2041. The city is planning for more segregated cycle lanes, extended pavements and roads limited or completely closed to traffic. One of the greatest pieces of its infrastructure, Crossrail (the Elizabeth line) works perfectly well with this challenge. Crossrail is one of the biggest transport infrastructure projects that has ever been undertaken in London and in the UK which will reshape the way Londoners commute in and out of the city.
London residential property prices
Data recording London house prices for the last 35 years shows the dominant upwards trend. There have been years of slow growth or periods of short-lived stagnation and lagging behind the national growth, but generally, the London property market has had an upward trajectory since 1975. Of course, London has shared the global property price crash in 2008/2009, the biggest fall in prices in modern history.
The most recent rapid growth of 2021 was sudden lifestyle changes during the pandemic, linked to lack of stock causing pent up demand from property buyers, as well as competitive mortgages, low interest rates and Government incentives such as the stamp duty tax reduction, furlough scheme and the mortgage guarantee scheme.
To accommodate its growing population London needs 52,000 new homes every year - as estimated in the Mayor’s London Plan. A decline in starts, permissions and applications over the last few years affected by the Pandemic, means future housing delivery will remain some way short of targets.
The average house prices in London increased annually by 5.5% in December 2021 reaching a record level of £521,000 and was nearly double the national average.
The annual London house prices increased by 4.8% over the year to March 2022. In March 2022, the most expensive London area to purchase a property was Kensington and Chelsea, where the average cost was £1.5 million. The cheapest borough was Barking and Dagenham, where the average cost was £342,000.
Despite the uncertainties, the future London house price growth is widely expected, and this forecast is based on a lack of housing stock and London’s safe investment location reputation which translates into ceaseless demand from domestic and foreign buyers.
London rental market
As one of World’s top innovative culture and business hubs attracting young professionals, as well as being a leading educational centre for students from all the continents, London has always had an exceptionally high demand for rental property from a wide range of tenant groups.
Faced with challenging economic circumstances that force changes in the way people rent and let property, London’s residential lettings market has proven exceptionally adaptable.
The city offers a fantastic range of rental property types and has well-established, expert lettings service providers including estate agents, managers, trades people and teams handling large portfolios and collections in the Prime, Central or Greater London locations.
As in any other big metropolitan city, London rental yields fluctuate from location to location. Some London districts reward investors with significant gains, so choosing the right post code could make a big difference when looking to invest in London. Also, as property size increases, from one to five bedrooms, the rental yield across London decreases. Annual expenses and purchase prices on any London property are generally higher, therefore the rental yields are tighter compared with those in locations outside.
After a period of stagnation and falling rental prices during the first year of the recent pandemic, the rental market is back on track showing strong performance and recovery. According to research from Savills, “the last three months of 2021 have been characterised by rental recovery in urban areas, as tenants who favoured more rural locations during the pandemic headed back to towns and cities in response to the easing of Coronavirus measures. This was further boosted by the return of international students and corporate relocators, all focused on proximity to places of study, work and transport links”. With more people returning to cities, even the prime London rental values experienced their strong growth after the pandemic.
a) Buy-to-let
London is a UK city that holds the most value in its rental homes, worth around £500 billion (2021 data). The Capital’s buy-to-let market is enormous and has always had high demand for rental property. In some recent periods such as the autumn 2021 post pandemic return to the city centre locations, the available rental stock was halved. Some of the most popular places to live such as Islington, Lambeth, Hackney and Camden saw the available stock reduced more than 50% in the same period. London properties often come with a high price tag, and high cost plus other additional taxes. That means that a buy to let property must work hard to return a profit. Therefore, most of the popular buy-to-let investments are found in postcodes with lower purchase property price tags and away from Central London. East London districts top the buy-to-let list including Barking & Dagenham, Newham and Havering. Next are southwestern regions such as Hounslow, Merton (Wimbledon & Colliers Wood), Sutton and Redbridge.
The performance of each district is linked primarily to the new infrastructure investments, as well as the progress of high-specification residential property redevelopments.
London districts are also looking to adopt the 15-minute cities concept which is transforming real estate globally in line with the changing buyer, tenant and occupier needs. The idea is about ‘building communities where leisure, work and retail opportunities are within a 15-minute walk’, or walkable places that promote healthy, sociable and active lifestyles. The concept has been recognised by the City of London Corporation announcing recent plans to create at least 1,500 new homes by 2030. The same concept is already transforming Canary Wharf from primarily an office district to a sustainable, mixed-use residential destination planning for more high-quality new homes and property.
In recent years, London has moved away from single use developments. The best examples are regeneration hubs such as Battersea Power Station, Elephant Park and Canary Wharf. London’s mixed-use hubs targeting a full breadth of occupiers, workers, and visitors which are also worth considering when investing include Euston, Earl’s Court and Canada Water.
b) Student housing
The UK is widely considered a global higher education powerhouse attracting over 2 million full-time students (data for 2020/21). Over 1 million are studying away from home. With a huge number of full-time and part-time, domestic, and international students, London’s student accommodation market is the biggest in the UK. Although less affordable than other UK cities, London is top rated for its world-leading institutions such as the Imperial College and King’s College London, and for its ability to provide access to fantastic research facilities, academic resources, institutes, archives, studies, over 1,000 museums and galleries, and 120 different libraries. To add to that is London’s reputation of an Open City attracting a record number of international students: with the University College London at the top of all UK universities with a total number of 23,360 - according to the Higher Education Statistic Agency data for 2021. In the list of the top 10 UK universities attracting most foreign students are also King’s College London, the Imperial College, and the University of the Art London. Investments in high-quality academic institutions in London and its proximity to Oxford and Cambridge Universities has led to the creation of new student housing markets in White City, King’s Cross and the Southbank districts.
Rental options for London students range from private landlords, Uni accommodation, and private halls or PBSA. Major research by a leading student investment experts Cushman & Wakefield’ (2021) finds that the demand continues to exceed the supply. The number of the UK (London too) students living in the private housing accommodation will continue to grow year on year, despite the increasing investment in the purpose-built development stock.
Student housing investment was once considered an ‘alternative asset type investment’. Today, it is a well-established, mainstream option mostly for its strong fundamentals such as the rising number of domestic and foreign student admissions. Compared to residential property, student housing investment usually offers higher yields. The rent students pay is usually high and the purchase cost of student property tends to be lower compared to that of a residential apartment or flat.
PBSA
As set in the London Plan 2021, London needs a minimum of 3,500 new and high quality (en suite) units added to its student accommodation market every year. For many years, the number of units delivered was beyond the target set. The Cushman &Wakefield research highlights that ‘for the first time in over five years, a major injection of new beds is expected to enter the London student market in 2021, with over 3,000 rooms set to be delivered’. The market still needs to accelerate with a high volume of investment just to catch up with demand which in turn is increasingly focused on high quality, value for money accommodation set in the right location and at the right price. Purposely Built Student Accommodation yields in prime London are generally stable and likely to rise due to the demand/supply imbalance which makes this market segment a highly attractive one.
The Cushman & Wakefield report concludes that the super prime and prime regional London locations remained broadly stable in 2020 despite a difficult political and economic backdrop. The student accommodation specialist lists the following yields for the period: Prime London: 4.00%, Super prime: 3.75-4.00%, and Prime regional: 3.75-4.00%.
Here below are some recent, planning approved PBSA projects:
- A 644-bed purpose-built student accommodation scheme in the Square Mile, serving the needs of LSE who wants to increase its number of student beds from 4,500 to 6,000, was approved in 2022 by the City of London Corporation.
- Grove Crescent Road in Stratford, a 2022 approved PBSA scheme in East London.
- Hammersmith and Fulham Council’s planning has been granted to a PBSA which will have 713 bed spaces serving the housing needs of students close to The Imperial College London’s White City Campus.
London regeneration areas
As many other capital cities around the World, London is delivering a string of tremendous urban regeneration projects in almost every of its boroughs. These investment projects concern large underused/underutilized land or distressed and decaying urban areas as well as some smaller pockets of land within the well-developed districts which are due for better use or improvement. These transformations are to improve the physical and environmental aspects and the connectivity of a district, and to serve the growing population needs for housing.
The London 2012 Olympic legacy covers urban regeneration of districts hosting the Games including Tower Hamlets, Newham, Hackney, and Waltham Forest. Ten years on, and the process is still ongoing with many investment and construction projects underway or due in the coming years.
London boroughs with most regeneration projects (2021 data) are Tower Hamlets (23), Islington (17), Lambeth (16), Hackney (15), and Southwark (13).
Some of the recently approved regeneration projects include:
Battersea: £1.4 billion estate regeneration programme approved in 2021, which will provide up to 2,500 new homes on the Winstanley and York Gardens estates.
North Greenwich: Developer U+I has secured the planning green light for Morden Wharf, a cluster of riverside residential towers on the southwestern fringes of the Greenwich Peninsula.
Greenwich: Meridian Quays, a seven-acres mixed use scheme is part of a large regeneration of North Greenwich, located near the Underground station. Developed by Knight Dragon, the Hong Kong-based developer, this next phase of the ongoing transformation of the district will create a new £2.5 billion neighbourhood in Greenwich. There will be 5,000 new homes, a hotel, restaurants, bars, coffee shops, leisure facilities and a school.
Woolwich: £290m regeneration scheme by Lovell has been given the go-ahead by Royal Borough of Greenwich to build 766 quality new homes.
Brent Cross: One of the largest projects in London, the Brent Cross Cricklewood scheme includes regeneration of 151 hectares to create a sustainable new town centre for Barnet and North London. This scheme includes the regeneration of Brent Cross Shopping Centre and the creation of 6,700 new homes.
Royal Docks: A very large, historic area in Docklands covering Royal Docks from Canning Town to North Woolwich will be rejuvenated with an investment worth £5billion.
Canada Water: taking over a historic dockyard on the south bank of the Thames, British Land is developing a 53-acre new town centre site with a park and waterfront. There will be up to 3,000 homes, 2.5 million sq ft of workspace, and a million sq ft of retail, leisure and education.
London opportunity areas
A good place to start exploring the driving infrastructure projects in London, which will ultimately impact your property investment, is The London Plan 2021. This document, produced by the Mayor of London and published by the Greater London Authority, sets the economic, environmental, transport and social framework for the development of London over the next 20-25 years.
The new housing target set out in the London Plan 2021 is 522,370 new homes over the period 2019-2029 or 52,000 every year. That is a 24% yearly target increase from the London Plan 2016.
The London Plan highlights major Opportunity Areas (OA) or key London locations ‘with potential for new homes, jobs and infrastructure of all types. It provides an appropriate spatial strategy that plans for London’s growth in a sustainable way. The housing targets set out for each London borough are the basis for planning for housing in London.’ The opportunity areas range in scale from 19 ha in constrained Central London locations such as the Tottenham Court Road OA - to 3900 ha at the Lee Valley OA. The OAs together have capacity to deliver up to 496,100–497,100 new homes and 728,600–735,000 new jobs over the long-term.
Boroughs expected to deliver most of the new homes are Newham and Tower Hamlets: 32,800 and 34,730 new homes respectively. On the other hand, boroughs such as Kensington & Chelsea and Richmond, have comparatively modest targets of 4,480 and 4,110 each.
After decades of huge developments on brownfield, derelict and underused land, and in an effort to reduce housing shortage, London is turning to infill developments or the redevelopment of vacant or under-utilised sites within existing communities. Greater London is classified as urbanized with over 85% of its land that has already been developed. Although occasionally very contagious, many new homes and city plans are now incorporating town centres with large capacity for housing or potential sites for infill development.
Mirroring the trend in the global new-build housing market, most of London’s opportunity areas feature high density, mixed-use and tall building neighbourhoods.
Some of larger Greater London Opportunity Areas:
Lee Valley, 3928 ha (hectares)
Hackney, Waltham Forest, Haringey and Enfield
Infrastructure: Crossrail 2 North
London Riverside, 2475 ha, Barking and Dagenham, Havering
Infrastructure: Thames Estuary North and South
Olympic Legacy, 1984 ha
Hackney, Newham, Tower Hamlets, Waltham Forest,
Infrastructure: Crossrail, Elizabeth line East
Royal Docks and Beckton Riverside, 937 ha
Newham
Thamesmead 877 ha
Abbey Wood, Greenwich, Bexley
Infrastructure: Thames Estuary North and South
City Fringe 898 ha
Tech City, Hackney, Islington, Tower Hamlets, Central London
Old Oak, 655 ha
Park Royal, Brent, Ealing, Hammersmith and Fulham
Infrastructure: Highspeed rail HS2/Thameslink.
Isle of Dogs, 488 ha
Tower Hamlets
Brent Cross/Cricklewood 324 ha
Barnet, Brent
Infrastructure: Highspeed rail HS2/Thameslink
Wembley, Brent, 235 ha
Infrastructure: Highspeed rail HS2 2/Thameslink
Vauxhall Nine Elms Battersea 227 ha
Lambeth, Wandsworth
Harrow and Wealdstone, 177 ha
Harrow
Infrastructure: Highspeed rail HS2/Thameslink
Elephant and Castle, 123 ha
Central London
Charlton Riverside, Greenwich, 121 ha
Thames Estuary North and South South
Woolwich, Greenwich, 66 ha
Infrastructure: Thames Estuary North and South
Canada Water, 58 ha
Southwark, Central London
Ilford, Redbridge, 55ha
Infrastructure: Crossrail, Elizabeth line East
Earl’s Court, 38 ha
West Kensington, Hammersmith and Fulham, Kensington and Chelsea
Infrastructure: Heathrow/Elizabeth Line West
The Crossrail (Elizabeth line) factor
Running through Central London from 24 May 2022, Crossrail or the Elizabeth line has been one of the major London property price accelerators over the last decade. The Crossrail infrastructure project is funded by the Government, the Mayor of London and London businesses. The new rail line provides a much improved, faster cross-Capital transport link which is also reducing the chronic public transport overcrowding in central London. Elizabeth line services are expected to carry up to 1,500 passengers, more than any other London Underground trains. The services provide fantastic time saving journeys: a trip from Abbey Wood to Tottenham Court Road is reduced by 28 minutes; Liverpool Street to Woolwich to 15 minutes; Farringdon to Canary Wharf is cut from 24 minutes to 10 minutes and Liverpool Street to Paddington – from 18 to 10 minutes.
There are 40 Crossrail stations (10 new) from Reading and Heathrow in the west to Shenfield and Abbey Wood in the east. The Elizabeth line is 73-mile long (118km) and is fully integrated with the existing Transport for London network infrastructure.
Crossrail is an old idea about a cross city rail line (which happens to be mostly underground) that needed to be built to improve transport within the Capital. The term Crossrail came about in 1974 when the line was subject of the London Rail Study by the then Greater London Council and Department for Environment. Approved in the 2000s, work on the line started in 2009.
Property investments along the Crossrail / Elizabeth line attract home owners and renters who are looking for easy access to Central London, more space for their money, new and energy efficient homes, and proximity to open spaces to pursue an active lifestyle. Some industry leaders estimate (Hamptons International) that property prices within a mile radius of any Crossrail / Elizabeth line station have increased, on average, by 66% since 2009. According to Rightmove, property asking prices have doubled in areas such as Abbey Wood in the east, or Twyford in the west. The average asking price in Abbey Wood was £356,801 in 2021 - a 103 per cent increase compared to ten years ago. Twyford - £637,075 - +50%; Reading - £369,935 - +62%.
Rental properties have followed the same trend, with rents rising over 40% in Slough, or 33% in Custom House.
Southall, West Drayton, Hayes and Harlington, Brentwood and Ilford are still seen as affordable, investment worth locations along the Elizabeth line, where the average property values are below that of the wider immediate area.
References
https://content.knightfrank.com/resources/knightfrank.com/london-report/london-report-2022.pdf
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https://opportunity.london/ - source for Population, lifestyle total value of real estate etc
Pages: 2, 3
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https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/march2022
London property prices
Page: 4
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https://www.london.gov.uk/what-we-do/regeneration/projects-map London regeneration areas
Pages: 7, 8
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https://apps.london.gov.uk/opportunity-areas/ opportunity areas
Pages: 8, 9
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https://www.london.gov.uk/sites/default/files/the_london_plan_2021.pdf
The London plan
https://www.getreading.co.uk/news/property/elizabeth-line-house-prices-explode-24012349
Crossrail , Pages: 10, 11
London Property Investment
London is a top ranked global business hub, a world-class open economy city and the biggest one in western Europe. In the Global Finance 2022 ranking of world’s best cities to live in, London claimed position No1. London is a city of choice due to its high score in culture, restaurants, shopping and nightlife, accessibility and population growth.
Over 2000 years the city has endured various crises from plague, fire, the Blitz, terrorist attacks, to financial crises and recessions, and has proven to be a resilient city with strength, unity and determination to overcome difficult times. London has its Resilience Partnership which gathers over 200 organisations developing together the city’s resilience through prevention, management and recovery.
The financial and political stability that London has enjoyed has rendered it into an attractive and dynamic property market that rewards forward planning, adaptability and innovation.