Cape Town - Many eager South African investors hoping for rich pickings off properties purchased in London during the 2007-2008 cycle have had their hopes dashed by overpriced and difficult to tenant properties.
Anthony Doyle, director of UK-based property company Propwealth, has a clear strategy on investing in London.
“It's not rocket science, but you would be surprised how many people get caught in an emotional purchase quandary,” says Doyle.
“You should always remove the emotional aspect as tenants don’t care about views of the Thames or gardens; they want transport, lifestyle and comfort."
Eight key factors for London investors
So what should you look out for?
“As investors ourselves, we follow eight simple steps and advise anyone who wishes to enjoy property investing in London to do the same,” says Doyle.
1. If you want to invest in buy to let property in the UK, especially in London, you first need to look for value. Always buy at a discount initially, or buy off plan for completion in two years or more.
The prices of the property will be set at current market values, which means you will get incremental capital growth until you actually take transfer of the property.
2. Stay well clear of existing London properties as your competitor will be the emotional or first-time buyer, and you will only be up against other non-investor buyers who will push up the price.
London property prices are back to the same level as before the crash of 2008.
3. Buy in areas of regeneration. Space is at a premium in London, so keep a look out for new train stations, transport hubs or local councils spending on neighbourhood upgrade schemes.
All this indicates good capital growth in the short term.
4. The property must offer lifestyle options that will attract good tenants. Concierge services, in-house gyms and convenience shops on site all increase rental income.
5. Watch your gross yields. Don’t touch anything below 5% gross as you will then need to contribute every month after general expenses like levies and any mortgage bond repayments.
6. Always allow for management and collection fees of around 10%. You will be investing long distance and don’t want the hassle of day-to-day issues.
7. Invest to hold, not to flip or sell on. Property is a slow wealth creation process with a 10-15 year outlook in London. You will be investing for hard currency returns in one of the worlds’ most vibrant and fastest growing cities.
8. Lastly, trust but verify everything anyone tells you, from rental incomes to regeneration plans.
Two potential hot spots
Doyle identifies two current developments he believes have good inherent value, both of which are in regeneration areas and have strong tenant demand with 5% to 6% yields.
Prime Place in Central Greenwich is an imaginative mixed-use scheme right next to Greenwich train station. It will bring many benefits to the local community and result in a considerable economic investment in the town centre.
It covers a 2 acre mixed-use scheme of 181 high quality new homes as well as a 104-bedroom hotel. As part of the regeneration scheme, 650 square metres of space for startup businesses will be made available.
There will be an extension to the existing Greenwich West Community Centre with further education and administrative space. Lifestyle aspects include a health and fitness club, a convenience food store as well as a retail facility and a pedestrian-friendly boulevard.
Completion of the Central Greenwich development is expected to be mid- to end-2014, and prices of the units start from £260 000 for a one-bed flat.
Marine Wharf, Surrey Quays in London's Docklands is a new development which is a 10-minute walk to Surrey Quays Station and a 15-minute walk to Canada Water in Zone 2.
Furthermore, London’s Docklands is now known for being one of the leading regeneration developments not just in London, but also in the world. Marine Wharf will consist of 532 new homes plus a commercial block.
Not only will it offer homes to live in, but also shops, bars, restaurants, leisure facilities and a Linear Park, an attractive soft landscaped area running alongside the South West boundary of the development and the Thames.
Prices start from £220 000 for a one-bedroom unit, and offer returns of 6%.
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