Improving rental yields in parts of London could kickstart an upturn in the local market this year, a new report suggests.
The new Asking Price Index from Home.co.uk sees an improvement in rental yields in the capital that it feels are the signs of ‘green shoots’ after three years of falling prices. Leading the way is the borough of Newham, where average rental yield was 4.9% in 2018.
The area, in the east of London, saw yields rise by 1.3% over the year. The highest rise was 1.5% in the City of London, but given that borough’s high-end status, Newham’s performance in the more affordable sector is more notable.
Newham includes areas like Stratford, Canning Town and Manor Park, and as well as being served by the Central Line and the Docklands Light Railway it will have stations on the Crossrail link that is nearing completion. A recent study by Landbay claimed that rents in areas along the route of the Elizabeth Line had risen by 15% since 2012, nearly double of those elsewhere in London. The average rent in Newham is £1,671, a rise of 7.6% on 2017.
Rents shoot up in Southwark
Next in the list is Hammersmith and Fulham, where rental yields were 5.1% in 2018, following on from 3.9% in 2017. Actual rents in the west London borough were up by 6.2% on the previous year. However, the prize for biggest rise in London rents in 2018 goes to Southwark, where they shot up by 20.2% to stand at an average of £2,350.
It seems almost certain that rents and yields will keep on rising this year, with a limited supply of rental stock ensuring fierce competition. The amount of rental properties entering the market in Greater London was 20% down in 2018.
“You just can’t ignore the London property market’s innate ability to bounce back,” said Home.co.uk director Doug Shepherd.
“History has shown us time and time again how the UK’s leading property market can burst back into growth after a period of correcting prices.
“The rate of rental yield rises is surely the best analytical tool to pinpoint where the first ‘green shoots’ will emerge. Whilst it is encouraging that 32 out of 33 London boroughs are showing increased yield year-on-year, it is where they are growing most quickly that is of keen interest to investors. When they approach 6% in 16 or more boroughs, demand in the London sales market will reignite.”