Demand for rental homes is continuing to outpace supply and drive up prices in London and that is an attractive proposition for many buy-to-let landlords.
Rental supply has been falling since increasing taxes have made the market more costly for landlords, with many finding it more cost-effective to simply reduce their portfolio of rental properties by selling up.
But for other property investors, now is a good time to invest in property, amid improving market conditions. But where are the latest potential London property hotspots?
Vatche Cherchian, regional director at Portico, said: “While house prices in London have remained relatively flat over the last couple of years, wage growth hasn’t.
“We’ve actually seen a 4% growth year-on-year in wages. And if you tally that wage growth increase up against flatlining London house prices, what you’re saying in real-terms is that it has become around 10% cheaper to buy a property, which is encouraging.”
Portico has identified eight areas that may be worth buying a property in 2020, based on rental yields and potential for capital growth.
No fewer than six of the top areas are located in East London, including Barking & Dagenham, Newham, Tower Hamlets, Redbridge, Havering and Ilford.
This region has seen a significant amount of regeneration and is becoming a sought-after location for homebuyers, investors and tenants as house prices, rental demand and population are forecast to see extensive growth.
West London and South London are also represented on the list with Hounslow and Sutton rounding out the top eight places to buy property in the capital.
Portico’s potential property hotspots for 2020:
Barking & Dagenham
Offering great value and high rental yields, Barking & Dagenham is expected to be boosted by future regeneration and investment projects, including planning permission having been secured for up to 10,800 new homes and shopping, leisure, community and healthcare facilities at Barking Riverside.
Average house price: £318,527
Average rental yield: 5.4%
With over £410m invested since 2012, Sutton is home to more than 6,800 businesses and is set for additional development and investment opportunities, which are expected to further unlock economic growth.
Average house price: £387,286
Average rental yield: 4.4%
Crossrail is coming to Havering with three Elizabeth Line stations from Romford to Harold Wood, which is expected to boost house prices. The riverside area of the borough is seeing an especially significant amount of regeneration, making it a top property hotspot.
Average house price: £392,031
Average rental yield: 4.9%
Offering great opportunities for first-time buyers and investors, Ilford has become a top commuter location and is home to the highest average rental yields on the list. Once Ilford Station has been connected to the Elizabeth line, there will be a train every five minutes during peak times into central London.
Average house price: £421,226
Average rental yield: 5.5%
Newham has seen significant regeneration since the 2012 Olympics, and a large part of the growth has caused the borough to see substantial property price increases and higher rental yields than London’s typical average.
Average house price: £445,425
Average rental yield: 4.9%
House price increases in Redbridge are expected to outpace other London boroughs by up to 17% according to some experts during the next five years. This offers homebuyers and investors a chance to potentially see impressive capital growth.
Average house price: £488,632
Average rental yield: 5%
Despite being one of the most expensive boroughs on the list, Hounslow offers larger sized homes for lower prices, which are hard to come by in Greater London.
Average house price: £497,758
Average rental yield: 4.7%
Home to one of the most varied demographics, Tower Hamlets has a wide range or properties, and a large number of tall buildings are in the pipeline, illustrating the borough’s growth and development.
Average house price: £545,550
Average rental yield: 4%