Market Commentary – North London
North London extends from Clerkenwell and Finsbury to Greater London’s boundary with Hertfordshire. From the more built-up areas including Islington and Kentish Town to the desirable open spaces around Hampstead and Hadley Wood, North London offers a wide range of real estate options for all.
Its emergence and popularity owes much to the excellent transport links served by three major underground lines and the overground, as well as King’s Cross and St Pancras stations. Taking in the bustle of Angel, the green spaces of Alexandra Palace and wonderful views of the city from Highgate Hill, it also offers some of London’s most desirable neighbourhoods. Indeed, four of the six areas listed by the Times as the best places to live in London in 2021 are in North London. One of them is Muswell Hill, which benefits from high achieving schools, an enviable high street, beautiful houses and surrounding parks. Another is Primrose Hill which is described as ‘an urban village that looks like a Wes Anderson film and is in walking distance of the West End’.
In light of the above, many parts of the North London market provide good liquidity and high yields for buy-to-let landlords. In the last quarter of 2021, residential yields in Camden, Haringey, Barnet and Enfield were 3.9%, 4.1%, 4.2% and 4.5% respectively, compared to an average of 3.6% across London and 2.9% in Zone 1. Yields are higher for commercial property and range from 5.1% – 8%.
It also provides a wide range of opportunities for value-add growth strategies. Over the last 20 years, the growing demand for space from workers wanting easy and affordable access to the city has given rise to a dramatic increase in property development and repositioning in the area. The conversion of larger Victorian homes and non-prime commercial assets to multi-unit housing is one example of this and something we expect to continue as we emerge from the pandemic. While the bulk of this is aimed at mid-market residential developments, higher end areas such as Beech Hill and Hampstead offer similar opportunities for the development of luxury apartments. Repositioning across both sectors has allowed many investors to enjoy internal rates of return of over 20%.
The AmCap-RE Greater London Fund holds a substantial number of assets in North London, focused on 1-2 bedroom mid-market residential and commercial properties. The average rental yield of its portfolio is 4.9% on fair value with a 95% occupancy rate. In addition, the fund pursues value-add growth strategies in North London through the refurbishment and repositioning of assets. These include the conversion of council and commercial assets to residential and the development of luxury homes.
North London has served the fund’s value and growth strategies very well over the years and management intend to maintain their network and competitive advantage in the region in the long-term.