When considering any real estate investment, rental yields and tenant demand are important considerations. So where are the best prospects for investors in the London property market?
Successive closures and job changes induced by the pandemic have made it difficult for owners and investors with properties in the capital. With the rollout of the vaccination having eased restrictions, the London property market is starting to look more positive.
Major lenders offer low mortgage interest rates and increase their loan limits. And investors and owners in the capital are now looking to improve their profitability and expand their real estate portfolio.
Sophie Durkin, regional director of Gantry, says: “Thanks to the roll-out of vaccination, Britain has finally enjoyed some return to normalcy. Rental demand has remained healthy and rental yields have consistently shown a promising recovery over the past two quarters.
“Homeowner instructions are also up 12% year over year, and tenant listings increased 22% from January 2021 to May 2021.”
Where are the strongest rental yields?
Rental yields vary widely depending on location and type of property. And with recent tax and legislative changes, more and more investors are focusing on achieving high rental yields. Data on average rental yields can give potential homeowners an idea of ââwhat they can expect to achieve.
Analysis of data from London real estate agent Portico revealed where the best parts of the capital are in terms of rental yields. Rental yields in the boroughs outside London are showing signs of strength.
East London in particular has the best return on real estate investment in the capital. This part of the capital is the only region with neighborhoods with average rental yields of 6% or more in the second quarter of 2021.
Hot spots for travel
Data shows commuting hotspots generate particularly high returns, especially compared to the rest of London. With the reopening of offices, rental demand and yields in these popular commuter locations are expected to remain strong. And areas that are expected to benefit from Crossrail and other types of regeneration could see additional growth in the future.
Within East London, Abbey Wood leads with an average yield of 6.7% in Q2. According to Portico, there has been an influx of investors buying properties for rent near the station. The Crossrail will bring 12 rapid trains from central London per hour. With the imminent arrival of this railway, Abbey Wood has become an attractive neighborhood.
Along the Beam River, also in east London, is another area with high rental demand and yields. In particular, properties in the Dagenham Road area are attractive to commuters with a proposed new national rail line. This would provide direct services to Fenchurch Street station in 20 minutes. The average rental yield observed in the region is impressive 6.3%.
Sophie Durkin comments: âOur latest rental yield research shows that there are certainly healthy rental yields in London, especially in areas experiencing significant regeneration and of course these areas stand to benefit greatly from Crossrail.
âEast London is still the main buying hotspot for renting – and, as foreclosure restrictions continue to ease, we expect tenant demand to increase. “