Property Investment and Buy-to-Let in the City of London: A Guide
Although it sounds big, the City of London is actually one of the smallest cities in the UK. That means it’s overlooked by many property investors. But for property investors with big ambitions (and a big budget), it could be just the place to invest. Here’s our guide to property investment in the City of London.
Why Invest in the City of London?
The City of London is the original centre of London. It is located on the River Thames, between the West End and the East End. The City of London is often known as just the ‘City’ or The Square Mile.
With a permanent population of only around 10,000, the City is one of the smallest UK cities. However, it is estimated that around 542,000 jobs are based here.
The City is a city in its own right – it’s not one of the 32 London boroughs. The local authority for the City is the City of London Corporation which is headed by the Lord Mayor. The City also has its own City of London Police.
Today the City of London is the main CBD or Central Business District of London. It is one of the world’s main centres for the financial services industry. The economy of the City is almost completely based around financial services and related services including banking, financial trading, insurance and law. Most of the world’s major financial services companies have offices here. The Bank of England is also based in the City.
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The City of London has some tourist and visitors sights too. St. Paul’s Cathedral is in the City and the Tower of London is nearby. Other notable places include the Old Bailey or Central Criminal Court, Mansion House, Guildhall, two Inns of Court, Leadenhall Market and Smithfield Market.
The City is home to many supertall buildings, and more are planned, such as the Gherkin, Cheesegrater and Walkie Talkie as they are informally known.
The City of London is very well connected by train, tube, DLR, bus and cycleway to other parts of London and the UK making it easily accessible for commuting. Main train stations include Liverpool Street, Blackfriars, Fenchurch Street, Cannon Street and Moorgate. The new Crossrail/Elizabeth Line will have stations at Liverpool Street and Farringdon nearby.
London is well known for having the highest property prices in the entire country. However, the City of London is not the most expensive part of London to invest in property.
The average property price in London is currently around £500,000. The average property price in the City of London is currently £781,788, according to HM Land Registry figures. The City of London is a cheaper place to invest in property than the City of Westminster, Kensington & Chelsea and Camden.
It is possible to find cheaper buy to let property in the City of London too. Although there are many areas of the City of London where property costs up to £10 million or more, Zoopla listings show that it is currently possible to buy an investment property here from around £350,000 – less than half the average price.
Property prices in the City of London can be very sensitive to the state of the economy and the fortunes of the financial services sector which is based here and factors such as Brexit and Covid have affected the market. Property prices in the City of London rose only slightly by 1% last year according to HM Land Registry.
The City of London has a unique property market and a unique rental market that is quite unlike any other part of London, or any other part of the UK. Property investors need to study the market and study tenant demand and decide what type of property will appeal to the market they are interested in.
There are very few houses to buy to let in the City of London. Most City properties are flats or apartments. These might be in some of the City’s historic buildings or in brand new blocks. Within the apartment market, there is a very wide choice of property types and sizes. Available properties include everything from compact studio apartments to luxury penthouse apartments.
Quality and amenities are factors that are very important to many tenants here, and which investors should consider. Tenants for properties at higher rents look for apartments in landmark buildings, views of the River Thames or the cityscape, concierge services and building amenities such as gyms and swimming pools.
Tenant types for City buy to let properties are almost always those who are working in the City itself and who want to be close to their office. A big attraction for City buy to lets is that tenants can walk to work and save on commuting costs.
Young professionals from the UK or elsewhere around the world are one of the main tenant groups. Tenants are likely to be a single person, a couple, or sometimes several sharers.
Students, particularly affluent foreign students, often look to buy or rent City property.
City property may also be rented by companies to accommodate their employers on a short or long term basis. This type of letting is known as a corporate let.
As well as standard long term lets there is good potential in the City for shorter-term lets, which is an opportunity City property investors might consider. Investors could consider renting property by the week or by the night, perhaps on a serviced accommodation basis.
Letting properties by the room, in an HMO or house in multiple occupation, is another opportunity to consider. This type of property is likely to appeal to those working in the City but who have smaller budgets. Shared properties may need an HMO licence from the City of London Corporation.
Few City property tenants are families with children, as the City itself has few schools within its boundaries and few amenities for families.
Rents and Yields
Home.co.uk’s Market Rent Summary gives an indication of the high level of rents that City of London property investors can receive. The data says that the average rent for a long term let in the City of London postcodes is currently £2,028 per month. Landlords in the City might expect to earn an average of £1,199 PCM for a one-bed property, £2,309 PCM for a two-bed property and £2,785 PCM for a three-bed property. A four-bed property in the area would have an average rent of £3,214 PCM and a five-bed property £3,673 PCM, the data says.
Research on Rightmove suggests that the cheapest studio flat will rent for around £1,000 PCM. The most luxurious three bedroom penthouse apartment will rent for around £16,000 PCM.
Rightmove figures suggest that a room in a shared house will rent for around £550 PCM including bills.
Possible returns from short term lets and serviced accommodation will depend on the size and quality of the accommodation, and the length of the letting. Research on London Serviced Apartments suggests serviced accommodation costs are between £110 and £400 per night.
On yields, the City is covered by some or all of the EC1, EC2, EC3 and EC4 postcode areas. Research on property.xyz suggests that the City of London long-term lets will return an average yield in the region of 2.2% to 2.4%. Yields may be more or less than this depending on the type of property and exact area and should be higher for short term lets.
Investors can find information on letting yields for any area of London using property xyz.
Where to Invest in the City of London
When investing in buy to let in the City, investors should consider issues such as access to the major City offices, tube and rail stations, and to local amenities such as shops, restaurants and gyms.
As a general guide, areas on the south side of the City are good for upmarket properties that have river views.
The west side of the City, from St. Paul’s westward, has the best access to the West End and the legal quarter around the Old Bailey, Inns of Court and the Royal Courts of Justice.
The central area, between Bank and Liverpool Street station, has the biggest concentration of city offices. Cheapside is the City’s main shopping street. To the north of this area, the Barbican Estate is a large residential estate of around 2,000 apartments.
In recent years, the north-east part of the City of London around and north of London Wall has become more sought after. As well as being close to the city offices and Liverpool Street train station this area has good access to Leadenhall Market, Commercial Street, Shoreditch High Street and Brick Lane, which are all known for their social scene with eateries, bars and independent shops.
Other Areas To Consider
Property investors who are interested in investing in the City of London might also consider other nearby areas too. These reports look at the best places to buy to let in nearby areas: