Zone 1 Prime Central Location, or Further Out?

No doubt that anyone who had bought any Zone 1 property prior to 2010 is now reaping large capital gains. Prime central London has always been sought after by investors from across the world.

Greater London property has appreciated too, but the appreciation of prime central London over the past decade has outperformed most Greater London areas. The properties we have bought so far are fairly humble, and are largely in zones 2-3, with good transport links.The most central investments we have are the Brickmakers Apartments, which is not exactly in zone 1, but is a comfortable 10 minute walk to Tower Hill underground station. (City of London)

London Zone 1 - Be prepared to pay millions ££

Why not Prime Central London?

1. Capital outlay much higher
Initially, given that we were new to London property, we were cautious and preferred to work with a bite sized investment. The capital outlay involved is obviously much higher with Central London property.

2. Rental yields generally lower
Rental yields are generally lower in Prime Central London than at the outskirts. This is especially pronounced if you are purchasing in today's market. Ex-council property aside, it is almost impossible to find a property in Prime Central London that gives a yield of 5%.

3. Plan to hold and not flip
We plan to hold on to our London investments for the medium to long term, and as a means to store savings value and hedge against inflation, our focus was not on immediate capital gains but a stable and high yield.

4. Multiple smaller investments over one large investment
With this investment philosophy, we opted for multiple smaller investments over a single Prime Central London acquisition.  Although it takes more effort to manage the portfolio, it also gives us more flexibility. It is not an all or nothing situation.  We can sell some along the way, if the need arises.

5. To flip or not to flip?
We have heard of the huge capital gains Singaporean investors have made with Zone 1 property. Some have even succeeded in flipping properties before completion, which saves incurring the stamp duty expense. Flipping property is not as prevalent in the UK as in Singapore and to flip for a profit in London was unheard of just a couple of years ago as new builds are known to be priced at a premium.

Now that we are more comfortable with London, we have started to look at Zone 1 properties. We may have missed the boat as prices are now very high. New builds at the Eastern side around Aldgate are priced at 1000 £ psf, as are the Nine Elms developments. Developments at the South Bank and Kings Cross areas are even more expensive.

We may have to start looking at the resale market for opportunities.

We buy to hold, not flip.

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