Is it better to invest in property in West or East London?

West London versus. east London

London, the bustling metropolis on the banks of the River Thames, is a city of diversity and contrasts. Its property market is no different, with distinct opportunities in different parts of the city. 

For property investors, there is often a debate about whether to invest in West or East London. Although the decision would ultimately depend on what you as a landlord are looking for in property, we will delve into the reasons why you would want to invest in either part. 

There are many different things that we would need to take into account before we can make this decision, such as:

• Property prices and affordability
• Rental yields
• Transportation and accessibility
• Development and regeneration
• Tenant demographics

So let’s find out more, and by the end of this guide, you should be able to figure out which side of London is better for you to invest in. 

Property prices and affordability

West London – high prices, high returns

West London, known for its affluent neighbourhoods like Kensington, Chelsea, and Notting Hill, is synonymous with luxury living. However, this affluence comes at a price, as you can only imagine. 

Property prices in West London are among the highest in the city but while the initial investment may be substantial, these areas also offer the potential for high returns, both in rental income and capital appreciation. If you have a substantial budget and are looking for long-term gains, West London might be your choice.

East London – affordable entry points

On the other side of the city, East London has historically been more affordable, making it a more accessible option for many investors. Areas like Hackney, Shoreditch, and Canary Wharf have witnessed significant regeneration, attracting young professionals and creatives. 

This has led to a strong demand for rental properties, resulting in steady rental income. East London’s affordability, coupled with its potential for growth, makes it an attractive prospect for investors with a more modest budget. 

Rental Yields

West London – moderate yields in prime locations

West London’s prime locations often yield moderate returns due to the high property prices. Rental yields in upscale neighbourhoods like Kensington and Chelsea may hover around 2-3%, which can be lower than what you might find in other parts of the city. 

However, these areas typically offer more stability in terms of tenant quality and demand. You may need to figure out what your goals are as a landlord and what you prefer – higher yields or better quality tenants. 

East London – competitive yields

East London tends to offer more competitive rental yields, ranging from 4-6% on average, which is significantly higher than that of West London. 

The higher yields are often a result of the younger demographic, which includes students and professionals seeking affordable accommodation. If you’re looking for more immediate cash flow, East London could be the better choice. Again, you need to discover what your preferences are as a landlord and if you want to invest in a younger type of tenant. 

Transportation and accessibility

West London – great connectivity

West London benefits from excellent transportation links, with multiple Underground lines and well-connected bus routes. Heathrow Airport is also conveniently located in the west, making it an attractive destination for international travellers and professionals. 

This connectivity can add value to your property investment, as accessibility is often a key factor for tenants. Is it one for you? 

East London – growing connectivity

East London has seen significant improvements in transportation infrastructure, with the Docklands Light Railway (DLR) starting in Canary Wharf, as well as the London Overground expanding accessibility to various parts of the city. This is a bustling city and transportation is a major plus for tenants and homemakers.  

Crossrail, a major ongoing project, will further enhance connectivity in the east. Investing in areas well-connected to these transport hubs can potentially yield long-term benefits as the area continues to develop.

Development and regeneration

West London – limited space but a stable market

West London is more established, with limited space for significant new developments. This can be an advantage in terms of property stability, as there is less risk of oversupply. 

But, this may also limit your options for capital growth through property appreciation, especially if this is your main objective for investing in property in London. You may not be able to diversify your portfolio in this area as much as you wish to. 

East London – regeneration opportunities

East London, on the other hand, has seen extensive regeneration efforts, particularly in areas like Stratford and the Royal Docks. These initiatives have attracted businesses, residents, and investors alike. Buying property in an up-and-coming area can lead to substantial capital gains over time, as you may already be aware. 

To further expand on this point, investing in East London may help you as a landlord diversify your property portfolio with improved infrastructure and amenities to offer your tenants. 

However, it also comes with some level of uncertainty, as the success of regeneration projects can vary.

Tenant types

West London – a diverse tenant base

West London tends to attract a diverse tenant base, including expatriates, families, and professionals working in the city’s financial district. This is mainly due to being closely linked to central London. 

This diversity can provide stability in rental demand, as it is less reliant on a specific demographic making it a great area to invest in, being protected by economic fluctuations. Additionally, with a more diverse tenant base comes more commercial opportunities for all consumers within the area. 

East London – young professionals and creatives

East London has a reputation for attracting a younger demographic, including professionals in creative industries and students. If you invest in this area, you may need to cater to the preferences and needs of this demographic, such as offering modern amenities and flexible rental terms. But, as you can imagine, investing in an area filled with a younger demographic is a great way to make sure that you keep up-to-date with the property market. 

Which one will it be for you?

The choice between investing in West London or East London ultimately depends on your investment goals, budget, and risk tolerance.

West London offers high-end properties with the potential for long-term capital appreciation but comes with a hefty price tag. Rental yields may be moderate, but stability is often higher.

Whereas East London provides more affordable entry points, competitive rental yields, and the potential for significant growth. However, it may involve more active management due to the younger tenant demographic.

Both areas have their merits, and some investors may even choose to diversify their portfolios by investing in both West and East London. It’s crucial to conduct thorough research, seek expert advice, and align your investment strategy with your financial goals to make an informed decision. Ultimately, the London property market is dynamic, and success often comes to those who adapt to changing trends and seize the right opportunities.

The beautiful thing about this is that it is completely up to your needs as a landlord and your property portfolio. 

As a landlord, owning the right landlord insurance premium for your property portfolio is key in property management. If you feel that you need more information on this, get in touch with us today!