The latest on London property market: tenant demand and rental yields


When considering any property investment, rental yields and tenant demand are important considerations. So where are the strongest prospects for investors in the London property market?

Successive lockdowns and pandemic-induced employment changes have made it tricky for landlords and investors with properties in the capital. With the vaccination rollout having allowed restrictions to ease, the London property market is starting to look more positive.

Major lenders are offering low mortgage interest rates and raising their lending ceilings. And investors and landlords in the capital are now looking to improve their profitability and expand their property portfolios.

Sophie Durkin, regional director of Portico, says: “Thanks to the vaccination roll-out, Britain has been finally enjoying some return to normalcy. Rental demand has remained healthy and rental yields have consistently demonstrated a promising recovery through the past two quarters.

“Landlord instructions are also up 12% year-on-year, and tenant registrations have increased by a significant 22% from January 2021 to May 2021.”

Where are rental yields the strongest?

Rental yields vary widely depending on location and property type. And with recent tax and legislative changes, more investors are focusing on achieving strong rental yields. Data on average rental yields can provide prospective landlords an idea of what they could expect to achieve.

London estate agent Portico’s data analysis has revealed where are the best parts of the capital in terms of rental yields. Rental yields throughout outer London boroughs are showing signs of strength.

East London in particular is showing the greatest return for property investment in the capital. This part of the capital is the only region home to neighbourhoods with average rental yields at 6% or higher in Q2 of 2021.

Hotspots for commuting

The data is showing that commuting hotspots are generating particularly high yields, especially when compared to the rest of London. With offices starting to reopen, rental demand and yields in these popular spots for commuters are expected to remain strong. And areas that are set to benefit from Crossrail and other kinds of regeneration could see further growth in the future.

Within East London, Abbey Wood is leading the way with an average yield of 6.7% in Q2. According to Portico, there have been an influx of investors buying properties to let near the train station there. The Crossrail will bring 12 fast central London trains per hour. With the imminent arrival of this railway, Abbey Wood has become an appealing area.

Along the Beam River, also in East London, is another area seeing strong rental demand and yields. In particular, properties in the Dagenham Road area are appealing for commuters with a new national rail line proposed. This would provide direct services to Fenchurch Street station within 20 minutes. The average rental yield seen in the area is an impressive 6.3%.

Sophie Durkin comments: “Our latest rental yield research shows that there are certainly some healthy rental yields to be found in London – especially in areas experiencing significant regeneration and of course, those areas set to benefit greatly from Crossrail.

“East London is still the leading buy-to-let hotspot – and, as lockdown restrictions continue to ease, we expect demand from tenants to increase.”

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The latest on London property market: tenant demand and rental yields


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