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5 Ways to Succeed in the Prime Buy-to-Let Market

Property experts explain why high-end rentals can still provide great opportunities for the savvy buy-to-let investor.

It’s no secret that the prime central London property market has had a tough time, as uncertainty over Brexit drags on and high stamp duty rates continue to bite. However, while demand for prime purchases is taking its time recovering, the lettings market is arguably bouncing back.

“People are choosing to rent their homes rather than sell, because London is still a beacon for many international renters. Its vibrancy, cultural diversity, world-class shopping and restaurant scene and education system are revered around the globe,” says Investec Private Bank Business Development Manager Peter Izard.

Here are five key considerations for anyone looking to invest in the prime buy-to-let market:

1. Location and the Crossrail effect
London is formed of two markets: prime central London (PCL) and everything else. PCL, which is often defined as Mayfair, Knightsbridge, Kensington and Chelsea, and Belgravia, offers excellent schools and good access to Heathrow, a key factor for international clients.

But there are other central hotspots worth looking at, such as Marylebone, suggests Izzy Birch Reynardson, head of super prime lettings in PCL for Savills: “For us, this area has outperformed everything else, helped by the quality of the stock – there are plenty of high-end new-build schemes – and improved access provided by Crossrail.”

Indeed, Crossrail, of which a stretch is due to open at the end of 2018, will open up further locations benefiting from faster links across London. Centrally, Tottenham Court Road, Woolwich and Abbey Wood will see reductions in travel time to key hubs. In the west, Acton and Hanwell are set to reap the rewards; or look east to Shenfield and Gidea Park.

London’s vibrancy, cultural diversity, world-class shopping and restaurant scene and education system are revered around the globe

Apart from Crossrail, urban regeneration projects will continue to create new rental hotspots across central London – from Nine Elms and the redeveloped Battersea Power Station, to Hackney and the ever-changing landscape of the Docklands and East London.

Don’t forget the continuing trend of affluent families moving to the suburbs, drawn to larger gardens and more privacy. Esher, Northwood and Cobham have outperformed prime London in recent years, posting average rent increases of 8% between 2012 and 2017, according to Savills. Access to central London and Heathrow, as well as excellent local schools (including international ones) are key here.

2. Best in class properties
The standard of rentals is the highest it’s ever been, Izard says. “Corporate rents drive high standards, and discerning renters now require security and discretion as well as highly specced properties. They need to have the best kitchens, large bathrooms, luxurious master suites and appeal to design-conscious tenants.” Lateral apartments with good layouts are popular, as are properties with outside space and the all-important storage.

3. The amenities race
Concierges, media rooms and gyms, once considered nice-to-have extras in new-build blocks, are now essential. Reynardson says other boxes that need to be ticked include a lift, parking and a swimming pool. Bookable boardrooms with the latest technology and private dining spaces are now a common feature of high-end developments. An increasing number of rentals are even serviced by five-star hotels, such as the Four Seasons and Shangri-La.

4. Schools quality
Schools remain an important source of appeal for families seeking a larger property. Indeed, international tenants in particular are likely to choose areas close to schools that meet their requirements: for example, the American Schools in St John’s Wood and Cobham and, for the French community, the Lycée Charles de Gaulle in South Kensington.

Schools are also a big factor in west and southwest London – especially in Notting Hill, Chiswick, Fulham and Richmond. And the new Eaton Square Mayfair School, which opened in September 2017, could be a game-changer for the area.

5. Real estate value
The prime central London property market is still adjusting to the new tax regime of three years ago, and, although sales are improving somewhat (the first quarter of 2018 showed a 0.3 per cent increase in house prices, according to a report from real estate firm JLL), many owners are still making the decision to rent and derive an income instead of selling.

Izard concludes: “From the tenant’s perspective, they can ‘try before they buy’ and spend the equivalent amount on rent for a couple of years that they otherwise might have paid in stamp duty if buying.”

Elizabeth Rowlinson is an editor and journalist who has written for The Telegraph, Yahoo Finance and The Times.

Disclaimer
The opinions and views expressed in the above article are for general information purposes, they should not be construed as recommendations or advice for any individual nor should any action be taken on account of the information presented.