London has been a global beacon for finance and investment for decades, growing from strength to strength. However, with the eye-watering increase in property prices in recent years within the capital, many workers find themselves unable to afford to live comfortably in the city. The potential gains for buy-to-let investors have also been significantly hampered, with average rental yields for London homes being as low as 3.2% in February 2017.
For several years now, young professionals have been moving out of London and into towns within an easy commuting distance in order to find a home to buy or rent at a price that doesn’t break the bank. And this is exactly where savvy investors should be looking.
Whilst the prestige of owning a London property might be appealing, when you compare the ROI to investing in commuter towns, there’s no question as to where you’ll get more for you money. After all, isn’t that the whole point of investing in the first place?
Take Luton for example, where you are just 23 minutes from London by train. But for that small distance of just 30 miles, buyers can save an impressive 65% on property prices! While the average price of property in London is currently £685,877, in Luton it is just £239,618, a massive £446,259 less! And with a 10.4% increase in average rents in Luton since 2014 (the highest in the UK, by the way), investors can achieve rental yields of 6% (double that of London) making Luton one of the most profitable places in the UK to be a landlord.
So what should you look for when considering investing in a key commuter town?
Obviously the time it takes to travel into the capital (usually by train) is a key factor in a commuter town’s appeal – hence the epithet ‘commuter town’. Ideally you would want to keep this under 45 minutes.
House Prices and Rental Yields
Of course the difference in property prices and relative rental yields you could achieve compared to the capital will always be top of your list of things to take into account as an investor. Make sure the cost of the property is in line with the yield you want to achieve. Just because a property is expensive doesn’t guarantee it will yield higher rents.
Commuter Travel Costs
Any savings that residents make on the cost of buying or renting a home in a commuter town is also impacted by the cost of their commute into London. Every Londoner is very aware of this. With some similar length routes costing more than others, it’s worth checking the prices for season tickets from the town you’re exploring. This is key in determining the commuter appeal.
Whilst those living in commuter town will still look to the city for some of their more ostentatious entertainment (with it being easy to travel to), you still want to be comfortable in the town you’re living in, so easy access to shops, good schools, bars and restaurants, etc are an important consideration. Pay attention to development in the area as well as this often brings in new amenities. By noticing small improvements in the town and investing earlier, you could gain even more in capital growth just a year or two down the line.
Upcoming Investment in the Area
This brings us to our last major point, which we just touched on. Any large-scale investment projects, such as town centre regeneration, in areas within the commuter belt are worth taking note of – and for towns that may previously have been thought of as a little too far out, transport infrastructure developments like Crossrail and can provide a huge boost. This is very fundamental when looking for new commuter towns to invest in. When the government is investing in the local transport system or even upgrading the train stations, that is usually followed by increases in house prices as well as more residents moving in due to the improved networks.
These factors all combine to provide the perfect enticement to potential residents and investors. With all this knowledge fresh in mind, now is a great time to look at potential property investments in commuter towns.
If you want to know what other factors to consider for your property investment then take a look at What Size Property Should You Buy for the Best Investment, or check out our Six Surprising Things That Affect Property Prices.
And if you’re already looking to start your investment journey, then take a look at the property we currently have available.