Is buying property in London a good investment in 2025?

The long-term outlook for London property investment

London property has shown resilience and growth over the years, and the capital's housing shortage, strict planning regulations, and limited development space all support appreciation for investors.

 

While new build developments help address housing needs, ongoing infrastructure and regeneration projects are transforming neighbourhoods and driving up property value. This creates opportunities for investors who are focused on capital growth.

 

Targets set out in projects like the New London Plan are also likely to shape the future of London’s property market.

Buying property in London vs the rest of the UK

London property commands premium prices, but there's a good reason for that: it consistently delivers stronger capital growth over time.

 

Cities like Manchester and Birmingham might offer higher rental yields (around 6-8% compared to London's 3-5%), but London's appreciation rates often make up the difference. London also benefits from steady international investment.

 

So, if you're prioritising long-term capital growth and market stability over immediate rental returns, London may be a profitable option.

How does London perform during market fluctuations?

During market fluctuations, prime London locations hold their value better. Properties in areas of regeneration are often more sensitive to market changes. However, new builds with modern specifications continue to attract tenants even during slower growth periods.

Why London property continues to attract investors

Whether you're making your first purchase or expanding an existing portfolio, London's unique mix of global influence and ongoing infrastructure development makes it popular for property investors.

Global city status

London sits in the top tier of global cities alongside New York and Tokyo, and it continues to attract international businesses, talent, and investment capital. This creates constant demand from overseas investors, international corporations, and individuals seeking premium UK property assets.

Diverse job market and high population growth

London's job market sector spans everything from finance and technology to the arts and healthcare. This creates employment opportunities that attract workers from across the UK and internationally, resulting in consistent property demand.

Advantages of buying property in London

You may be wondering what the advantages of buying property in London are, and what you are likely to benefit from. Explore the top reasons to buy in London here.

Strong capital appreciation over time

As neighbourhoods develop and infrastructure improves, London property values continue to rise. With the opening of the Elizabeth line, properties with access to stations along this route have become better connected and increasingly sought after. Regeneration projects across London continue to boost capital appreciation. Investors buying ahead of these upgrades have often been rewarded with higher rental yields and stronger capital growth.

High rental demand

London's rental market stays remarkably strong, with around 2.7 million private renters across the capital. Investing in buy-to-let properties in areas with higher rental yields can deliver a strong ROI for investors. New build flats are especially popular with young professionals, downsizers, and anyone prioritising modern features, energy efficiency, and minimal maintenance.

Resilient property prices in prime and regeneration zones

Prime central London locations, such as Kensington and Chelsea, retain their value even during economic downturns. This is thanks to wealthy domestic and international buyers who view these areas as safe havens.

 

Regeneration areas like King's Cross, Stratford, and Battersea have transformed into desirable neighbourhoods, with sustained price growth following infrastructure investment. New builds in these zones can benefit from current amenities and planned improvements.

Risks and considerations when investing in London property

London offers genuine investment potential, but it's not without challenges. Understanding the risks and considerations can help you make informed decisions and set realistic expectations.

Higher upfront costs compared to other regions

Regardless of where you buy in London, prices can be significantly higher than in other UK cities. House prices in London averaged £736,315 over the last year, whereas homes in Manchester averaged £274,008. When combined with Stamp Duty, legal fees and potential refurbishment costs, investors can expect to pay more in London than elsewhere in the UK. However, investors should consider the long-term capital appreciation potential in London when considering this higher price point.

 

For more information, check out our guide to calculating the cost of buying a new home.

Mortgage affordability and rate changes

Buy-to-let mortgage rates move in line with the Bank of England base rate. As of December 2025, the current base rate is 3.75%, compared with 0.25% in December 2021. These rate increases have pushed up typical mortgage costs, which can reduce rental yields. Lenders also assess affordability, which can limit your borrowing capacity and interest rates, restricting which properties qualify for financing.

Stamp Duty and tax implications

If you're buying an additional residential property, such as a buy-to-let investment, you will usually have to pay higher rates of Stamp Duty. A 5% surcharge applies to properties up to £125,000, in addition to the standard rates.

 

Purchase price	Additional property rate
Up to £125,000	5%
£125,001 to £250,000	7%
£250,001 to £925,000	10%
£925,001 to £1,500,000	15%
Over £1,500,000	17%

 

If your buy-to-let costs £300,000, the Stamp Duty is calculated as follows:

• 5% on the first £125,000 = £6,250

• 7% on the portion from £125,001 to £250,000 = £8,750

• 10% on the final £50,000 = £5,000

• Total SDLT = £20,000

Rental income tax also applies. The first £1,000 of income from your property rental is tax-free; after this, you must register for Self Assessment if your earnings are more than £2,500 after allowable expenses, or £10,000 before allowable expenses.

 

You may also need to pay Capital Gains Tax (CGT) if you make a profit when you sell or ‘dispose of’ a property that’s not your home (like buy-to-let properties). The Capital Gains tax-free allowance is £3,000.

Key areas where London property performs well

Certain London zones consistently outperform, thanks to excellent transport links, proximity to employment, and investment in regeneration.

Zones 1 to 2

Zone 1-2 areas, such as King's Cross, Canary Wharf, and Southbank, offer new build developments with strong capital growth potential. Areas along the Elizabeth Line, like Woolwich, Abbey Wood and Ealing, are expected to see property capital appreciation as the route matures.

Regeneration zones and emerging areas

Regeneration zones like Nine Elms and Brent Cross provide more affordable entry points with significant growth potential as these areas develop. Outer London hubs such as Croydon and Barking offer better rental yields, while still benefiting from infrastructure investment.

Is buying a flat in London a good investment?

When buying a flat in London, your returns will come from rental income and capital appreciation. How much you earn can vary based on location, property type, and purchase date. Success depends on choosing the right property in the right area at the right price. For those with sufficient capital, a long-term outlook, and realistic expectations, buying a London flat can be a great choice.

 

Ready to buy your new home in London? Check out our fantastic offers to help you move. Call or visit our Sales Advisers to start your homebuying journey today.