London Commuter Belt: Your Next Property Investment?
Property prices in London suffered a major decline last year, the first since 2009. While London battled with a deterioration of the property investment market, areas on the London commuter belt stepped into the spotlight.
We first saw the decline of the London market during lockdown. Residents began searching for more space and more affordable rents. City life came to a standstill during lockdown; offices were unused, and restaurants and bars closed their doors. Therefore, tenants saw little point in paying extortionate prices without the added benefits of a central location. Thus, workers and families began to look elsewhere for more affordable property.
This led to the rise of commuter belt property. For a lower price, commuter towns have London at arm’s reach. Residents can access the same job opportunities and city centre amenities but for prices you can not find in London. Also, the further you move outside of London, the more you are surrounded by greenery and outdoor space – which is another huge appeal and a popular buyer trend we have seen following lockdown.
Investors who are looking to purchase property in the capital will know it has lost its shine. Prices are high and yields are low. London has been sharing the spotlight with other Northern hotspots for some time. But now, it seems commuter belt locations will be the hottest investment locations of 2022. If you are seeking high growth potential and rental yields, commuter locations will be the ideal choice for your next property investment.
Why is the London Commuter Belt a strong property investment opportunity?
- New Crossrail 2022 will increase connectivity to the capital.
- Improved transport will increase property prices, meaning higher capital appreciation.
- Prices are much more affordable than in London, so you will achieve much higher returns on your investment.
- Higher rental yields are achievable.
- Properties on the commuter belt have access to more outdoor space – a popular buyer trend in the post-pandemic market.
The New Crossrail 2022 – The Elizabeth Line
The Crossrail remains on track to open in the first half of 2022. The new Elizabeth line will rejuvenate travel around the capital, through greater London and beyond, into previously unconnected areas. Before, it could be said that Canary Wharf, Reading, and Slough had little in common. Now, they will be gladly linked by Crossrail.
Congestion will be eased, and journey times slashed. Upon completion, there will be 40 Crossrail stations, existing over 21 London boroughs.
According to the Property Impact report, house prices will rise by 20% in areas that have access to a Crossrail. Buy-to-let investors, as a result, are flocking to these commuter hotspots to take advantage of the capital appreciation gains.
Significant progress has been made across the Elizabeth line project, and it is now in its final stages before completion. It is anticipated that the expansion will bring an additional 1.5 million people within a 45-minute commute of Central London.
Consequently, this opens up an array of investment opportunities. In particular, in previously unconnected areas such as Reading, Slough, and Essex. Naturally, property prices are going to rise in these areas as a direct result of the Elizabeth line. Demand will follow from those looking to move out of the capital, but still wanting to remain connected. Therefore, high demand and rising property prices make for an ideal investor market.
The expensive London property market
High rents and purchase prices have been a driving force for the ‘London exodus’. However, it is not just residents turning their backs away from the capital, but investors are being priced out too. According to Savills, investors can save an average of £3,000 per minute the further they travel outside of London.
Renters are also choosing to swap their prime city location in favour of cheaper prices and more space. The millennial generation is widely known to be the prime rental market. However, millennials are now entering their 30s and 40s. This generational shift correlates with the rise of the London commuter belt, as this age period tends to be when tenants look for places to ‘settle down’ in the long term. More often than not, these will be properties with ample indoor and outdoor space. Something many tenants will struggle to find or afford in Central London. Thus, turning to commuter towns.
Compared to this time last year, we saw a flight of demand to village and rural locations. Priorities are shifting once again to cater to a better work-life balance. Transport links and lifestyle amenities being at the top of many buyers priorities. Investors, therefore, should bear this in mind when deciding on the location of their next investment.
Statistics continue to show that properties with strong transport links to a city centre will be high in demand. Thankfully, with the introduction of the Elizabeth line, properties on the commuter belt will experience this firsthand. Even before the completion of the new Crossrail, we can see property prices creeping up along the commuter belt. Therefore, investors can access the highest returns if they invest now. Upon completion of the Elizabeth line, properties in the surrounding areas will shoot up in price and demand.
Rental growth on the commuter belt
Savills reported rents in the commuter belt have already hit their highest levels of annual growth since 2007. In Q2 2021, rents grew in the commuter belt by 2.5%. This resulted in huge annual rental growth of 7.2% in the year up to July 2021 – a figure which is unmatched elsewhere in the country.
One reason for this growth was the increase in homeworking. This diminished the demand for central London property. The mass movement of tenants wanting to live outside of the capital has allowed commuter locations to welcome in some of the best rental prices. This is a clear indication of strong tenant demand along the commuter belt and highlights the fantastic property investment opportunities.
The introduction of the Elizabeth line will increase the appeal of these locations to professional tenants taking a ‘hybrid working’ approach. Therefore, driving rental growth even further.
Historically, transport links have played a key part in property price performance, especially in London. Therefore, it comes as no surprise that the £15.7 billion Crossrail project is going to bring some notable property price movement.
On top of this, for any buy-to-let investors, the project could not come at a better time. The ‘London Exodus’ has driven up rental demand in these commuter locations. Post-pandemic, tenant priorities have shifted towards a better work-life balance. Tenants are valuing having more space, whilst still being a commutable distance to the capital for work and leisure.
Yet, it is not just strong rental growth we can expect from commuter belt hotspots, but high capital growth too. Savills have predicted growth as high as 21.6% over the next five years. Therefore, now is a great time to tap into the commuter belt property investment opportunities. Especially for investors wanting to achieve the highest returns.
In terms of key investor locations, it seems the South-East is already benefitting significantly. Over the last 12 months, the South-East has appeared to be the most popular region for London leavers. Rental values have increased by 8.1%. Compared to the 5.9% UK average, this is a much faster rate. Thus, we would advise investors to look at key South-East locations, especially within Essex. If you are an investor wanting to secure a higher than average rental income from your buy to let property,
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