Best London Rental Yields 2021
Are you in the market for an investment property in London? If so, you’ll be interested in what the London estate agency Portico has to say about the best London rental yields from 2021
November 29, 2021
4 minute read
Remember the cry of the nineteenth century prospectors searching for gold – Go West! But, if you’re a landlord, the advice today is to head east. Properties in east London continue to provide the best rental yields in the capital.
Top of the list is Creekmouth at 6 percent. Barking and Cranbrook are in hot pursuit at 5.9 percent, with several other east London locations posting the same figures.
Compare that to the rest of the capital, where Freezywater and Ponders End in north London reached 5.7 percent. Further west the numbers drop with Hayes and Harlington managing only 5.1 percent. West Wickham tops the southwest London league table with just 4.8 percent.
If you want to get a complete picture of the rental scene across London, these figures are taken from the latest Q4 research by Portico. But, they are just the headline figures. Let’s look at what’s going on in the east and how these trends compare with the rest of the capital.
Imbalance in the rental market
Looking at the bigger picture, the dominant theme in the 2021 London rental market has been imbalance. On the demand side, the number of tenants searching for a property was up by 55 percent from August 2020 to August this year. But, the number of properties available for rent was down by 58 percent over the same period.
That imbalance led to an average increase in rental prices from August to August of 3.6 percent across London, according to Rightmove. And, there’s a prediction of further increases to come of around 5.5 percent, according to a forecast by Benham and Reeves.
That’s good news for landlords and investors as the market revives and confidence grows. But, with rental price increases and yields varying across London, it’s essential to look for the best locations to invest.
Why East London offers the best rental yield
Currently, that makes east London a prime target and here’s why, as Portico’s Regional Director Sophie Durkin explains,
“Many of the capital’s highest rental yields are found in areas with lower-than-average London property prices, despite the fact that many of those areas are experiencing an exciting time of growth and regeneration. These pockets are currently providing some excellent opportunities for investors.”
Regeneration is a key factor in Barking
Regeneration is certainly one of the factors behind the 6 percent performance of league leader Creekmouth in Barking. Creekmouth benefits from its proximity to one of the biggest regeneration projects in the Thames Gateway. Although the area is predominantly industrial and commercial, developers are working with local businesses to promote job growth, introduce new residential components and improve the environment. Creekmouth also has the advantage of some of the lowest house prices in London at an average of £300,000.
There’s a similar picture in the centre of Barking where redevelopment, new homes and new businesses and retail outlets around the mainline station. Plus affordable average house prices of around £350,000 are attracting families, professionals and investors to the area and delivering yields of 5.9 percent.
Good connections in Cranbrook
Cranbrook, which achieved yields of 5.9 percent, is part of the borough of Ilford, with a good quality of life. It has good connections to the city, yet offers affordable properties for rent. It is close to many green spaces, including Wanstead Park, Wanstead Flats and its own Cranbrook Park.
Little Heath for the village feel
Another East London area producing strong yields of 5.8 percent is Little Heath, but its success is based on very different factors. It’s a conservation area with a distinct village feel, yet it’s very close to the main A12 trunk road.
East London’s appeal
There’s a similar picture across the rest of east London. A heady mix of regeneration, affordable properties, new housing developments, good transport links, green spaces and environmental improvements create a recipe for success for anyone hoping to attract buyers or tenants.
Best London Rental Yields for 2022
Looking ahead to 2022, while economic recovery is predicted to continue, some uncertainty remains about new variants of the virus and its impact on the country. However, investor confidence should remain high as a degree of balance returns to the rental market and more properties become available for tenants.
As we mentioned earlier, Benham and Reeves forecast a future increase of 5.5 percent in rental prices. They also found that the volume of properties let to tenants rose 67 percent year on year and 22.7 percent compared to pre-pandemic levels.
All of this, together with the example shown by east London should encourage landlords and investors to plan for growth in 2022.
If you are considering new investments, or want to find out either the sales value of your rental property or how much it would achieve for rent or for sale, Portico has an online rental valuation tool that can help you make more accurate calculations.
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