Marylebone the undisputed champion vs. the new challenger Paddington! How does the potential for buy-to-let property investment compare between these two neighbourhoods, which area should we be focussing our time and money on?

Date Published 25 April 2016

After such positive feedback regarding last week`s article, where I undertook an investment comparison between Marylebone and Fitzrovia, one particularly interested client emailed me requesting that I do a similarly structured article – but this time comparing Marylebone to nearby Paddington. This particular client already owns a few buy-to-let property investments in the Paddington area, but after hearing time after time about just how well Marylebone is currently performing, he is now considering expanding his investments further East across Paddington and entering the Marylebone property investment scene! Marylebone historically has a few common similarities with Paddington, with both areas being viewed in past years as lowly neighbours to Central London`s more elite districts - such as Mayfair and Belgravia. Marylebone was often shunned by high profile domestic as well as international investors, but is now seen as one of the most promising investment destinations within inner London, thanks to a series of factors – notably including the heavy financial investment and overall involvement from the Howard De Walden and Portman Estates. Comparatively, Paddington, a location once referred to as disreputable and sleazy, especially when mentioned in the same breath as London`s other high-end areas and was probably more commonly associated as the home of Paddington Bear, rather than a fortress for property investment. However, today Paddington`s property market is in a much more promising state, with great boutique shopping, outstanding schools as well as the large-scale regeneration recently achieved with British Land investing £470 million towards the modernization of Paddington central in 2013. The future of the Paddington area is also very promising, especially with the pending arrival of Crossrail, which will transform Paddington (an already major transportation service for the W2 area) into a public transportation titan; journeys from Paddington to Liverpool Street being reduced to a mere 9 minutes (rather than its current 21 minutes) and areas such as Canary Wharf now being directly accessible in approximately 16 minutes! So with both areas` prospects clearly expressing bright fortunes for the future, let`s examine the financial figures to support this in more detail and to compare them against one another. I will be using 2 bedroom and 3 bedroom properties as my models, which shall be taken across two streets from both Marylebone and Paddington. The investment characteristics I will be focussing on are the average property values, the average rental values and what sort of rental yield these two indicators calculate towards; I will also be illustrating the capital growth over the last 10 years, in each of these streets.

Property Investment in Paddington:

Praed Street (W2)

2 bedroom flats: Average Property Value: £1,087,596 - Average Rental Value: £3,200 (pcm) - Predicted Rental Yield= 3.53% - Average Purchase Price in 2006: £521,000 - Capital Growth over the last 10 years (2006 – 2016) = 74%
3 bedroom flats: Average Property Value: £1,516,327 – Average Rental Value: £4,475 (pcm) - Predicted Rental Yield= 3.54% - Average Purchase Price in 2006: £646,813 - Capital Growth over the last 10 years (2006 – 2016) = 86%

Sussex Gardens (W2)

2 bedroom flats: Average Property Value: £1,006,453- Average Rental Value: £3,100 (pcm) - Predicted Rental Yield= 3.69% - Average Purchase Price in 2006: £491,450 - Capital Growth over the last 10 years (2006 – 2016) = 72%
3 bedroom flats: Average Property Value: £1,379,333 – Average Rental Value: £4,036 (pcm) - Predicted Rental Yield= 3.51% - Average Purchase Price in 2006: £571,422 - Capital Growth over the last 10 years (2006 – 2016) = 88%

Property Investment in Marylebone:

Blandford Street (W1U)

2 bedroom flats: Average Property Value: £1,450,500 - Average Rental Value: £4,380 (pcm) - Predicted Rental Yield= 3.62% - Average Purchase Price in 2006: £690,000 - Capital Growth over the last 10 years (2006 – 2016) = 75%
3 bedroom flats: Average Property Value: £2,120,186 – Average Rental Value: £6,300 (pcm) - Predicted Rental Yield= 3.56% - Average Purchase Price in 2006: £830,000 - Capital Growth over the last 10 years (2006 – 2016) = 94%

Queen Anne Street (W1G)

2 bedroom flats: Average Property Value: £1,261,709 - Average Rental Value: £3,680 (pcm) - Predicted Rental Yield= 3.50% - Average Purchase Price in 2006: £565,000 - Capital Growth over the last 10 years (2006 – 2016) = 81%
3 bedroom flats: Average Property Value: £1,848,166 – Average Rental Value: £5,470 (pcm) - Predicted Rental Yield= 3.55% - Average Purchase Price in 2006: £735,500 - Capital Growth over the last 10 years (2006 – 2016) = 92%

If we proceed to analyse these figures, we can immediately see that Marylebone as well as Paddington both offer commendable investment opportunities, with 2 and 3 bedroom properties in either area exceeding predicted rental yields of 3.50% or more, emitting a growth (over the last 10 years) of at least 72% or over and providing very healthy rental values, which surpass £3,000 (pcm) in every instance illustrated. If we begin by focussing on Paddington, whilst using the streets discussed, I can reveal to you that the average property price for 2 bedroom properties here is an estimated £1,047,024, which is a much higher average of £1,447,830 for 3 bedroom properties. Comparing these prices to Marylebone, we can see that the prestige of this area is certainly more reflected with prices noticeably higher here; the average valuation for 2 bedroom flats (considering our 2 illustrated streets) is £1,356,104, and for 3 bedroom properties the average cost stretches to £1,984,176. Coming back to Paddington, the average rental values for 2 bedroom properties here (across our 2 streets) stands at £3,837.50 (pcm), whereas the average rental value for 3 bedroom properties increases to £4,255.50 (pcm). The average rental yields across both streets, when averaged out and conjoined with one another, equates to 3.56% for 2 bedroom flats and is a slightly lower account of 3.52% for 3 bedroom flats. If we weigh these figures up against Marylebone, 2 bedroom homes generate £192.50 (pcm) more rental income, circulating at around £4,030 (pcm) on average, but with 3 bedroom homes a massive difference of £1,629.50 (pcm) can be seen, which averages out to a rental value of £5,885 (pcm). Regarding the rental yields, the two areas are almost symmetrical with Marylebone offering 3.56% rental yield (identical to Paddington) and there is only a minimal difference between the two areas considering 3 bedroom properties – Marylebone generates 3.55%, which may only be a 0.03% difference, but is still nonetheless slightly higher. However, the real game changer between the two areas is undoubtedly the capital growth I`d have to say! For Paddington, capital growth rates hit around 73% for addresses with 2 bedrooms and 87% for properties which contain 3 bedrooms; whereas Marylebone submit capital growth ratings of 78% for the former, and 93% for the latter amount of bedrooms. In both instances the capital growth of Marylebone is distinctly higher (5% more for 2 bedroom flats and 6% more for 3 bedroom flats); we are thus shown that the probability of increased investment potential is more effective here and that Marylebone has the capability to increase your initial financial input much faster than Paddington. In overall, I`d say that although Paddington represents a pretty good investment outlet, the majority of our investment indicators point towards an investment in Marylebone; nonetheless suitable investment opportunities can certainly be found in both areas, so keep a good eye out for everyday deals!

If you would like a more in depth analysis regarding either (or both) the Marylebone and Paddington areas, their investment parallels as well as the advantages of choosing one district`s prospects over its neighbour`s, please freely raise any questions with me, I am always happy to share my knowledge and be of service.