London rental yields are on the rise after a temporary pandemic slump, according to research by rental platform Rentd.
It says southern areas of the capital are providing particularly strong opportunities for buy-to-let landlords.
London’s property market was hit by a dip in demand during the pandemic, as people prioritised green, open space over urban living. This, alongside a reduced need to commute to the office, created a drop in demand for rental homes in England’s biggest city.
This fall in demand caused rental values to dip and led to a fall in yields. However, with the London rental market improving, Rentd has seen yields increase again.
In the past year alone, average yields have climbed by 0.3%, from 3.3% to 3.6%. However, there are a good number of areas where yields have climbed more dramatically.
In the SE17 outcode area around Walworth, yields have increased by 1.4%, from 4% to 5.4%; and up in Hampstead Heath’s NW3 area, they’re up 1.1% from 2.9% to 4%.
In the Forest Gate area of E7, yields have increased by 1%, from 3.7%-4.7%, and the same increase applies to both SE16 and SE8.
In E9, SE4, SE5, CR4, and EN4 respectively, yields have increased by 0.9% on the year.
Ahmed Gamal, Founder and CEO of Rentd, comments: “The capital’s rental market is showing a solid return to form after a slightly concerning dip in the early days of the pandemic. It was probably a little naive to think that renters would reject London in the long-term. It is, after all, one the greatest cities on earth and the opportunities it presents are unmatched in the UK.
“It’s interesting to see the south of the city enjoying much of the strongest yield growth, suggesting that, while people are still happy to live in a major city, they also want to maintain easy access to the green and coastal locations easily accessible from the south.”
New data from Portico reveals which London hotspots are primed for excellent investment opportunities due to a combination of affordability, rental yield performance, and regeneration in the area.
The London estate agent has commented on the following top hotspots:
Tottenham provides significant room for equity growth when compared to its broader borough market position, with regeneration projects in the works to back that growth.
Seven Sisters is an up-and-coming area offering affordable London living in close proximity to many popular, vibrant areas.
Edmonton is a vibrant multicultural community that offers fantastic rental yields, with excellent transport links and huge regeneration benefits.
Barking is back again from Portico’s ‘Where to buy property in 2021’ guide. It still represents outstanding affordability and opportunity for growth thanks to its connectivity and regeneration efforts.
Ilford is one to watch, with the eagerly anticipated impact of the Elizabeth Line completion coming soon. Ilford has affordable property prices, steady rental yields and is great for commuters.
Chadwell Heath provides affordable housing and Elizabeth Line connectivity is on its way. Proximity to many buzzing retail and leisure hubs and healthy rental yields are other benefits. Chadwell Heath is a fantastic option for investors looking for a more suburban neighbourhood.
Top six investment hotspots by average property price
Top six investment hotspots by rental yield figures
The North of England currently provides the most valuable investment opportunities, research from StripeHomes shows.
Birmingham and Newcastle-based property developer StripeHomes has examined where buy-to-let landlords can find the best rental yields in England.
Regional average rental yields
Looking at regional data, the best buy-to-let yields can be found in the North East. The region is currently home to an average house price of £144,032 and an average rent value of £566 per month. The rental yield is 4.7%, above the national average of 3.9%.
Second on the list is Yorkshire & Humber, where the average house price is £179,408 and the average rent is £631 per month, providing a rental yield of 4.2%.
Third place goes to the North West, which has an average yield of 4.2%, followed by London, where high house prices are matched by high rent values to create a yield of just under 4%.
Rounding off the top five is the West Midlands, where an average house price of £216,973 meets an average rent value of £697 per month to create a rental yield of 3.9%.
The current average yield in each region of England
Taking a closer look at the rental yields of individual town and cities, the best rental yields for buy-to-let landlords in England are found in Newcastle-upon-Tyne. With an average house price of £177,821 and average monthly rent of £844, the city offers a rental yield of 5.7%.
Blackpool is close behind with an average house price of £116,939 and an average rent of £540 per month, creating a rental yield of 5.5%.
Stoke-on-Trent can also provide a rental yield of 5.5%, while Burnley in Lancashire and Knowsley in Merseyside both offer rental yields of 5.4%.
The areas of England with the highest average rental yield at present
James Forrester, Managing Director of StripeHomes, comments: “It’s great to see a number of areas presenting strong yields to buy-to-let investors despite the government’s best efforts to reduce profit margins in an attempt to disincentivise landlords and free up housing stock for general homebuyers.
“As the backbone of the rental market, the buy-to-let sector plays an incredibly important role in providing many with a place to live, but we simply can’t expect the nation’s landlords to provide this service at a loss.
“However, the year ahead looks positive and with travel restrictions lifting, a return to face-to-face teaching at universities as well as a return to the physical workplace, increasing demand should help boost many areas of the market.”
East London currently offers the best rental yields in the capital, according to research from Portico.
The London estate agent has found that the area of Abbey Wood in East London has experienced an influx of investors buying up affordable properties to let near the train station, thanks to the arrival of the Crossrail. It believes that the availability of 12 fast central London trains every hour has significantly bolstered this area’s growth. This puts Abbey Wood at the top for the best rental yields throughout London for Q2 of 2021, at an impressive 6.7%. The highest yield in the area can be found along Yarnton Way to the east.
The agent reports that properties in the area of Dagenham Road are also benefiting from a proposed national rail service to Fenchurch Street Station in under 20 minutes. With easy access to Lakeside, Romford, and the A13, this area suits commuters and lifestyle seekers. The rental yield in this area is at 6.3% for Q2 of 2021.
Third spot for this quarter goes to the east London area of Creekmouth. Portico says the area is producing a strong rental yield of 6%, despite being largely known for its industrial estate.
East London,Top Yields
Abbey Wood (East Yarnton Way)
Dagenham Road, Beam River
Across the rest of the capital, north London’s Ponders End and Freezywater in Enfield both offer a rental yield of 5.7%.
North London, Top Yields
Ponders End, Enfield
Edmonton Green, Enfield
Enfield Wash, Enfield
Northumberland Park (Tottenham)
The best rental yields in the west can be found in Hayes and Harlington (5.2%). In the south, Eastfields is top at 5.8%.
West London, Top Yields by Neighbourhood
Hayes and Harlington
Northolt (Specifically West of Northolt Station)
Hayes & Harlington Station
Hayes End / West Drayton
South London, Top Yields
Eastfields, Manor Way
Buy-to-let hotspots across the capital are viewable on Portico’s rental yield map.
Sophie Durkin (MNAEA, MARLA), Portico Regional Director, 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.
“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.”
As demand for homes with gardens has risen due to the pandemic, landscaping material provider Paving Direct has researched the best places in the UK to invest in buy-to-let.
Paving Direct looked at the average price of renting a three-bed home in each city across the country on Rightmove to determine the changes in rental yields.
This research shows that having a garden adds 25% more to the average rent price, but this varies drastically when broken down city by city.
According to the data, the most expensive gardens in the UK are in Bath, with over 43% added to the average rent price.
The top 10 cities where renters are paying the most for gardens
Additional Value of garden
Newcastle Upon Tyne
The research also found the areas where gardens are less likely to impact the rental yield. Properties in Kingston Upon Hull, Sheffield and Leicester ranked bottom of the table.
The 10 cities where gardens add the lowest value
Additional Value of garden
Kingston Upon Hull
Cass Heaphy, Digital Director at Paving Direct, comments: “Homes in the centre of cities like Bath and Birmingham do not always have a garden, which can drastically increase the price of houses which do benefit from a green space. With the impact of lockdown, we’ve seen demand for paving jump. People have been spending an increasing amount of time in their own homes and want to make the most of their outdoor space.
“The data here shows just how much value a garden can add to a house and why homeowners need to be making the most of their outside space. Likewise, property investors need to be aware of the opportunity cost of upgrading the garden in their properties, as it can add real value, and higher income.
“I think one of the key things to come out of the whole lockdown experience for many people is really valuing their garden. It has underscored our appreciation of all the benefits it provides to happiness, health and well-being. That appreciation is only going to increase demand and therefore, more value, to homes with gardens or outdoor spaces.”
While the data shows gardens add value to homes across the country, the research showed less than a 1% price difference between houses with and without gardens in both Sheffield and Hull.
Daniel Bunting, Estate Agent at Apropos, comments: “From my own stock of managed properties I have noticed that smaller flats and houses with no outside space have received much less interest than usual. Properties with lots of natural light have done well but properties with outside space have seen increases in rent of up to 10% more than equivalent properties without outside space. This is clearly due to people spending more time at home and being restricted on travel.
“We live in a country with high population density so having some outside space to call your own I think is more important here than other countries. Also, we are more limited on suitable weather for being outside so we want to make the most of it when the weather is good.”
With lockdown restrictions being gradually eased, and major mortgage lenders such as Barclays, Accord Mortgages, and Skipton International cutting rates, London lettings agency Portico looks into the best property investment locations in the capital.
According to Portico’s data-analysis and interactive rental yield map, east London offers the best rental yields in the capital.
Within east London, Barking has one of the lowest median house prices across Greater London According to the Evening Standard, the average house price in the borough was just over £300,000 at the end of last year. Portico also reports that it has the best current rental yield in the capital at 5.9%.
Although property prices are slightly higher in Upney than in other parts of east London, Portico points out that landlords can still find investment opportunities here with a yield of 5.8%. Third on the list if Wall End, with a 5.8% rental yield.
Across the rest of the capital, north London’s Brimsdown offers a yield of 5.6%. The best yield in the west is 5.1% in Hayes and Harlington, and in the south, Mitcham offers 4.9%.
East London,Top Yields by Neighbourhood
Barking and Dagenham
North London, Top Yields
South London, Top Yields
Willowbrook Estate, Peckham
West London, Top Yields by Neighbourhood
Hayes and Harlington
Robert Nichols, CEO of Portico, says: “Landlords and tenants have both changed their thinking in recent years due to a combination of factors. While property prices rose overall during the first half of the last decade and climbed 74% between 2010 – 2020, rents largely followed modest wage rises, and rental yields suffered somewhat as a result – especially in areas around central and West London. Heading into the new decade, coupled with Brexit, the global health crisis heaped further uncertainty on an already subdued property market, and that has carried into the current year.
“Despite this, our research shows that there are still healthy rental yields to be found in London – if you know where to look. Outer London areas are actually seeing rent increases between 1-3% as tenants – now spending a lot more time at home – migrate from more central areas to the suburbs looking for more space. East London is still a buy-to-let hotspot – and we expect demand from tenants to increase as lockdown restrictions ease.”