Renting In London: Three Reasons Why Expat Buy To Let Landlords Are Winning

Even though UK base rate has begun to fall and so therefore have buy to let mortgage costs, rental costs grew on average by 17% in 2022 and by 5.7% in the year to June 2024, according to Zoopla, a property portal. These figures are well above average UK Consumer Price Index inflation, which for the 12 months to July, rose by 2.2%, according to the Office for National Statistics.  Rents are therefore growing at a far faster rate than inflation, giving expat buy to let landlords a potential real return on their investment.

These figures are supported by our own experience as online mortgage brokers. Guy Stephenson, a director at Offshoreonline notes, “We regularly speak to estate agents to verify rental costs as part of a mortgage application and this has revealed extraordinary levels of demand in the market, which does not seem to be abating – we regularly hear estate agents in cities say they have many and sometimes up to 20 tenants  chasing a single vacancy.”

So here are three real client examples Offshoreonline witnessed  in the last month of would be tenants trying to rent in London. An accountant who tired of the stress of living in Brixton decided to upgraded to a one bed studio in nearby Clapham. His rental costs more than doubled to £2600 per month. At the same time, two professional researchers working at a leading London university have just taken on an ex council house near Old Street – rent £2600 or £1300 each per month. And finally, there is the university graduate who is moving in to share a two bed flat in Clapham North,  very much a “mates rates” agreement, but still paying over £1000 per month rental.

Pre pandemic, these figures would have been close to half today’s costs. Why is this happening? Certainly the number of “accidental” landlords is falling. Stephenson continues, “These are people who may have moved abroad or got married and now have a house which they no longer need to live in, so they rented it. Previously, the UK tax regime was attractive to such “accidental” landlords, especially to higher rate tax payers. Now a lot of these benefits have been removed for and UK landlords simply do not have the will to put up with ever increasing bureaucracy and changing rules, so they are exiting the market and reducing the supply of rental homes. “

Energy Performance Certificates (EPCs) are another area which have many landlords on the run. Going forward, most houses now need to have at least a “D” rating for rental and often with a potential to be upgradable to a “C” with modest work, such as installing a new boiler or double glazing. Faced with higher than expected renovation works, again many landlords are choosing to sell and exit the market

However, for the serious expat buy to let mortgage investor who approaches the market with a well researched plan, there is still money to be made. Buy the right property at the right price in the right place and the experiences of our three renters in London shows that gross rental returns of over 5% are regularly available and as these are currently rising at above inflation rates, it means a real rate of return for the investor.

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