Landlords have been feeling the pinch in recent times. First, there were tax changes. Then, the pandemic slowed down the market even further, making it difficult for both renters and buyers to view or move into new properties. Fewer opportunities for a return have meant it’s never been more important for investors to do their research before investing – but widespread lockdowns and restrictions have made that challenging or impossible.
Thankfully, the vaccine roll-out is bringing falling rates of infection and hospitalisations, and many landlords and investors may now begin looking to expand their portfolios. Restrictions are gradually being eased, and major lenders such as Barclays, Accord Mortgages, and Skipton International have already cut rates and raised their lending ceilings. So, for investors looking to bounce back from COVID-19, where’s the best place in London to look at the moment?
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 – at just a shade over £300,000 and the best current rental yield in the capital at an impressive 5.9%. Barking has enjoyed significant redevelopment in recent times, and that’s being reflected in demand from tenants. Regeneration of the town centre has brought new retail and business spaces, along with more new homes.
You don’t have to travel far in east London to find the next best rental yields on Portico’s chart. Upney is to the east of the same borough, and the tube station provides easy access to the city. While property prices are slightly higher than in other parts of the district, landlords can still find investment bargains, and a yield of 5.8% certainly helps.
Third on the east London table comes Wall End, also boasting a 5.8% yield. The neighbourhood sits within multicultural East Ham, near the River Roding. It has good transport links and benefits from many older, lower-priced properties.
Across the rest of the capital, north London’s Brimsdown offers a healthy 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%. The top performers in the north and west of the capital share an ongoing transformation from their more commercial or industrial pasts and the future arrival of Crossrail trains. Mitcham, in the south, has long been popular with retirees.
As a comparison, according to Zoopla, London’s average gross rental yield was 3.8% in December 2020, down from 4.2% in February and 5.9% at its September 2012 peak. At the end of last year, the UK average was 5.3%.
Portico CEO Robert Nichols 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.”
Landlords will regard the Government’s recent announcement of a plan to emerge from lockdown to be a positive sign, and they’ll be further buoyed by the fact that there are still strong rental yields to be found in London. However, while that improved economic outlook offers some opportunities elsewhere, the road out of lockdown still appears to point toward the east of the capital for London investors.
To find buy-to-let hotspots across the capital, landlords can use Portico’s rental yield map to instantly drill down within individual postcodes and identify the neighbourhoods, and even streets, representing the highest return on investment.
London’s Top Rental Yield Hotspots in Q1 2021
|Barking||5.9%||The east’s top performer, this much redeveloped and regenerated suburb has median prices about a third of London’s average.|
|Upney||5.8%||Also in the east, but with slightly higher median house prices than its neighbour, Upney boasts an underground station with fast, easy access to central London.|
|Wall End||5.8%||Wall End is a small multicultural community close to the River Roding. It lacks facilities, but Wall End has good transport links and many older properties at low prices.|
|Brimsdown||5.6%||To the North, with good transport links, Brimsdown station is set to get a Crossrail upgrade, and the suburb lies close to the M25.|
|East Ham||5.5%||East Ham has seen rapid property price increases, thanks in part to the arrival of the Olympic Park.. It’s a very young community with an average age of early 30s.|