While rental can be above mortgage repayments in the UK (particularly London), 2x is unusually high. It sounds like the mortgage in question is only for a small part of the total value of the flat.
I end up where I can afford to buy my own flat and rent it out to someone who is not myself at the rent I am paying and make a profit. But I would not be offered sufficient mortgage to simply own it myself despite the fact that the rent I pay is higher than the mortgage would be (and indeed even accounting for 2% rate rise I'd be fine).
If landlord A puts down 50% of the purchase price and landlord B puts down 20%, their mortgage amounts (and montly cashflows) will be different, but the inherent value proposition to the landlord will be about the same.
Likewise, if someone bought 10 years ago and their value doubled (but their mortgage stayed the same), that property will "appear" more profitable to that landlord than if they sold that rental to another landlord. That's why I think the "property holding costs" should be based on the full, mark-to-market, cost of the property today, and be based on a 100% financing mortgage rate.
There's also a strong argument that we shouldn't include the principal paydown part of the mortgage payment when doing this analysis, as that's a forced-savings (and cashflow) item, not an inherent profitability impact.
It's of course true, that even with a catastrophic collapse in the housing market, the money sunk into the principal are rarely truly lost. At some point the market is likely to recover to the point that it is worth something. If you can afford to wait.
The point is that rents are higher than mortgages which gives the case of having money means you can save money. And that's before you consider the massive asset you own then.
£275k property with £1700/pm rental yield is very, very good.
Average rental yield (before tax) is around 4-6% of property value per year.
Generally speaking though, your point is true of course. Having enough capital to buy a property in London instead of renting (especially if you bought a few years ago) will save you a lot of money in the long run, provided that property prices don't go down between your your buy/sell dates.