Since moving into No. 10 in 2010, David Cameron and his wife, Samantha, have made about £430,000 from renting out their North Kensington home, according to the Prime Minister’s recently published annual accounts. Makes you wish you had the money to invest in London’s posh bits, doesn’t it?
Well, as it happens, it shouldn’t, because the Camerons’ return on investment has been pretty rubbish. I am sure no one is going to feel sorry for them, but it’s worth pointing out that if they had wanted to maximise their rental income, they would have been better off selling their home and investing the money in bricks and mortar in a cheaper borough.
A four-bedroom Edwardian house around the corner from their property in W10 is to let at the moment for £7,583 a month, or £90,996 a year. Eye-watering yes, but a good return on investment? No. Similar houses in the same postcode are for sale for at least £2.25 million — which means if you invested in one as a buy to let, you’d get a gross rental yield of only four per cent. That’s poor even by London standards.
As the PM published a summary of his accounts rather than his actual tax return, we don’t know how much it has cost him to manage his North Kensington pad, but I assume the Camerons are using an agent to take care of it. I can’t see Dave or Sam scheduling a boiler repair between an EU summit and a press conference. So that will cost them around £18,000 a year in fees.
They should also be setting aside about £10,000 for maintenance and repairs, so they are probably getting a net yield of less than three per cent.
Fortunately for the Camerons, they don’t have a mortgage on the property, according to press reports, so unlike landlords who are highly leveraged, they won’t be hit by the Chancellor’s decision to withdraw tax relief on mortgage-interest payments for rental property from next year and replace it with a much more miserly tax credit. That must be a relief for the Prime Minister and his wife.
But the fact remains that their income from the property, given the scale of their investment, is low, which is the case with properties in all prime London postcodes. These homes cost so much to buy that even though the monthly rent could be the equivalent of the cost of a car, they are weak investments if you take only the rental yield into consideration.
I have a not-very-fancy four-bedroom rental property on a south London housing estate that gives a gross yield of 5.5 per cent. That’s not great, but it is higher than the Camerons are getting, and demonstrates that the most expensive properties are not the best investment if you are looking for a regular income.
Yields in pretty much the whole of the Greater London area are so terribly unexciting, in fact, that you would be better off investing well beyond Zone 3 or even outside the capital altogether, in places such as Southampton or Manchester, if you want a really good return.
However, I am sure the Camerons have more important reasons for hanging on to their North Kensington home than the rent. Given the rise in prime London property prices over the past few years, the capital gain will be huge.
Also, as Cameron has said he doesn’t intend to serve a third term as prime minister, like other “accidental landlords” he may return to his home at some point. Some might speculate that his tenants could expect their Section 21 eviction notice quite soon.
- Victoria Whitlock lets four properties in south London. To contact Victoria with your ideas and views, tweet @vicwhitlock