There hasn’t been a lot of cheer in recent months for buy-to-let landlords with investment properties in and around London. Property prices and rents in London seemed to be on an inexorable rise during a long boom period following the international financial crisis. While other regions of the UK suffered steeper price drops and took longer to see the housing market stir back to life, between 2012 and 2017 property in London recorded average gains of 61% – capital value growth of over 10% a year before rental income was taken into the equation.
However, over the past couple of years, other regions of the country, particularly the larger cities from the Midlands north started to do outstrip returns found in the capital. Birmingham, Manchester, Liverpool, Edinburgh and Glasgow saw property price growth rates accelerate past most areas of London and the South East and also boasted significantly better rental returns.
That divergence in fortunes was compounded over the past 12 months with London-based property prices largely stagnating. Some areas, particularly the most exclusive central areas have seen a significant drop in prices. We reported here earlier this month that across prime London prices were recorded as being 5% below their 2014 peak, a decline that widens to as much as 11% in the most expensive postcodes.
While prime London isn’t out of the woods yet, there are other areas of the capital that are being tipped to see significant price rises over the next few years. Forward looking investors looking for the upcoming London hotspots that hold the most promise for investment properties are monitoring future transport infrastructure plans.
Convenient access to Central London and other parts of the capital make a huge difference to both sales prices and rents. Neighbourhoods that are slightly off the grid when it comes to the most convenient modes of transport, but are due to be plugged in, should be the focus. Another factor to watch is increasing activity by property developers in an area. Other redevelopment plans such as new retail and commercial projects can quickly up the profile, and prices, in formerly scruffy neighbourhoods.
So which are the under the radar London areas worth a look for investment properties that have a good chance of recording strong gains over the next 5 years?
Nunhead: located in close proximity to Peckham and Brixton, two now fashionable, while retaining a gentrified urban edge, areas in South East London where prices have risen significantly over the past decade. Nunhead is quieter and also greener, making it popular with families. It’s also seen little construction activity in recent years but Daisy Mason of real estate agency Foxtons tips it as about to bloom.
Tottenham: Mark Lawrinson of Portico, another London estate agency, fancies Tottenham to the north. High Road West, a £1 billion regeneration project, is set to include 10,000 new homes and commercial properties and be built over the course of the next 15 years. Many property experts believe that the still largely shabby area will become a destination in a similar way as the Stratford area was transformed following the London Olympics.
Brent Cross/Wembley: a little further to the west, again in the north part of the city, in Zone 4, the Brent Cross shopping centre, one of London’s oldest, is also set to see a revamp that will include 200 new shops. Mr Lawrinson is of the opinion this will again boost property prices in the immediate vicinity and neighbouring Wembley.
Forest Gate: another tip from a local agent, this time Mark Burns of Hopwood House, this East London region should be one of the biggest beneficiaries of the new Crossrail link. Average prices are still well below London averages, at £442,000, and investment properties should be targeting rental yields of 4.1%, also healthy for capital standards.
Lisson Grove: more centrally located and upmarket Lisson Grove might not fit the profile of the London areas mentioned so far. However, this area’s development is well behind pricey neighbouring territories such as Marlybone, St. John’s Wood and Regent’s Park. And with a 20 year regeneration plan having been put together by Westminster Council, modelled on Portobello Road, now could be the time to get in. Knight Frank has forecast that prices in the area will rise to an average of £1850 a sq ft from the current £1450.
Hackney Wick: adjacent to Stratford and the Olympic Park area that has already moved upmarket over recent years, Hackney Wick is another poor neighbour scenario. And like the other regions already mentioned, that’s exactly its attraction. It’s an as yet ungentrified oasis with hipster Hackney on one side and the new face of Stratford on the other. The local Overground station to Canary Wharf is being giving a £25 million facelift and the longer term plan is to build thousands of new properties, a part of which will be live/work start-up units. The proximity to the ‘Silicon Roundabout’ of Old Street is likely to mean a quick transformation to hip over the next several years.
Southall and Hayes: a West London area previously isolated in terms of high speed transport links, the the impending Crossrail will change all that, connecting Southall and Hayes to Paddington, Central London and Liverpool Street. In anticipation of the new attraction the area is expected to hold, 8 significant developments will add 4500 new homes to the region and prices are expected to rise.
Wood Green: this one is in some respects more of a long term prospect with a Crossrail 2 station in the area a strong likelihood. However, current transport links are also reasonable, with Kings Cross a 15-minute journey on the Piccadilly line. A local regeneration plan for 7700 new homes, a new town centre and commercial/office area is soon to get underway.
West Ham: if investment properties with steep capital gains seem unlikely in London, Knight Frank is tipping West Ham prices to rise from £700 sq ft to £950 sq ft by 2021, which adds up to over 10% per annum. The area has lagged comparable surrounding regions on price rises over the past 10 years and will have a Crossrail station. The tube station has also been reclassified as Zone 2/3, saving commuters several hundred pounds a year.
Canada Water: another area local agents expect to see big price rises in over the next few years. Canada Water has been in the shadow of neighbouring Canary Wharf but is less than 15 minutes from the West End on the Jubilee Line. Throw in a £2 billion plan for 3500 new residential properties, commercial properties, a new park and a King’s College campus in place and this is likely to be one of the hottest new spots in the capital before long.
When it comes to property investment, cities to the north might offer superior rental returns but London will always hold value. And, if investors are canny in picking the pockets yet to bloom, strong capital gains are still a realistic possibility. Outside of the 10 covered in more detail here, Leyton, Camden are also tipped by many property specialists, and a little longer term Mayor Khan’s London Plan has earmarked Colindale, Cricklewood, Harrow, Kensal Canalside, Catford, New Cross, Park Royal, Woolwich and Thamesmead as ripe for redevelopment. There are still opportunities out there!