A growing prevalence of longer distance commuters into London is starting to have an effect on the amount of rental income that investors in emerging towns and cities are able to get on their properties, it has been reported.
In recent years, people who work in the capital have been moving away from London to live, and it’s no surprise why when we consider reports from the Land Registry that suggest that homeowners can save £3,000 on property for every additional minute they commute into the city.
It’s similarly beneficial for tenants to live out of London to save money on housing costs, and for this reason, many people in the private rented sector have been gravitating away from the capital for the last few years. But while for years this meant looking at homes in Essex and Greater London, the spread of commuters is now widening, as value becomes an important consideration.
And as the commuter belt for London workers extends ever further beyond the M25, off plan property investment in growing communities like Luton are reaping the benefits. For those who have invested in Luton, low initial purchase prices and growing demand from young professionals looking for rented properties in particular, means their income and yields improving all the time.
While in London the cost of renting a property has been falling in recent years – it’s down by 1.06 per cent in the year to the end of July – places like Luton are thriving. According to the latest data from the Landbay rental index, Luton tenants are able to get themselves somewhere to live for as little as half of what they would be paying for an equivalent property in the capital.
And as a result of this, more people are now willing to tear themselves away from the capital to live in emerging commuter towns like Luton. The knock-on effect of this is that these towns see more demand, which breeds competition, and means landlords can ask for more for their properties in the future.
Landbay reports that in the 12 months to the end of July, Luton led the way nationwide, with rental prices up by an impressive 4.23 per cent year on year. This helps to deliver far higher yields for investors than they might get elsewhere, and positions Luton as one of the best, and one of the highest potential, areas in England to invest in.
“With rising inflation and rock bottom interest rates it is little surprise to see demand in the more affordable Home Counties rising faster than pricier parts of London and the south-east,” said John Goodall, chief executive officer of Landbay.
“Naturally these surrounding areas are starting to experience a surge in rental prices, creating a ripple effect out from the capital. There are of course a number of factors at play, but as yields tighten in the capital landlords may well be branching out to the East of England in a bid to meet this demand,” he added.
A record £1.5 billion worth of private investment in the Bedfordshire town and its new-found Enterprise Zone status have helped improve the perception of Luton. Improved infrastructure and train links have also helped to boost the popularity of Luton as a commuter belt town, with more people realising the benefits of commuting via train into the capital for work.
“Investors have cottoned on to the fact that renters are no longer willing to pay the high price of renting a small room in London when they can rent an apartment or house in a commuter belt town. With London just 22 minutes by train, Luton has emerged as a hotspot for renters and investors, who are no longer willing to pay the high price tag for property in London,” Jerald Solis, Business Development Director of Experience Invest explains.
“As private investment continues to grow, we expect that Luton will emerge as London’s most sought-after commuter belt town for property investors,” he adds.