Research and reports
With rents in the capital still the highest in the country, we’ve taken a look into the best areas to buy-to-let in London. Data and findings this year come from Totally Money’s most recent buy-to-let yield map.
When looking into the best buy-to-let areas in the UK, London will be a priority for many investors, despite continued low rental yields across 2018.
With impressive capital gains and unique return on investment opportunities, when we’re talking about buy-to-let hotspots, London can’t be ignored.
London property prices continue to overshadow any other part of the UK and as a result, making a profit in the capital is more challenging for buy-to-let.
In general, east London offers the highest yields, with north London performing worst. Out of all the London postcodes surveyed, five of the areas with the smallest yields were in the north, whilst half of the top performers were in the east.
East London boasts some impressive yields, with highs of nearly 5 per cent. East Ham (E6) performed best overall, with yields of 4.81 per cent. Stratford (E15), Plaistow (E13), Poplar (E14) and Chingford (E4) all also came within London’s top 10, with yields well over 4 per cent.
Newham is a particularly interesting area to invest in. With Stratford’s vast regeneration ongoing since the London 2012 Olympics, the E15 postcode has an average rental yield of 4.45 per cent, which is comfortably above the capital’s typical percentage.
Newham also includes top performer East Ham (E6), where the average monthly rental value stands at £1,421, against relatively modest average asking prices of £354,162.
And if you drop to south east London, you’ll find maybe one of the best places in the whole of the UK for rental yield. Bexley boasts more affordable properties than central locations, and rental yields for Thamesmead (SE28) average at 4.46 per cent.
If that’s not enough to make you consider Bexley for your next investment, it also has one of the lowest average house prices of any of the London boroughs with Thamesmead standing at £296,439.
Going into 2019, east London has again taken the lead in terms of rental yield. Areas from Stratford to Chingford have rental yields of at least 4.20 per cent.
Next to east London, the rest of the capital’s offerings pale a little, and rental yields in south London are down on what they were a year or two ago. Greater south London is particularly affected, with commuter towns taking a hit.
In 2018, we reported that Bromley was faring well but this popular area has suffered declining yields over the year, and is nowhere near the top.
However, if it’s commuter spots you’re keen on, Southend-on-Sea ranks ninth in the UK’s overall top 25, with an average yield of 8.02 per cent. Read our article about the buy-to-let market in Southend-on-Sea for a more detailed picture.
This is still well above the average for the capital, though, and current fluctuations may not be representative of the long-term trends.
West London offers a mixed bag to landlords looking for top-ranking London property opportunities. On the one hand it’s the traditionally more leafy, expensive part of the capital, for renters and buyers alike, with west-central areas like Chelsea and Kensington fetching upwards of £2.5 million on average.
There are deals to be found, though, with relatively central areas such as Hammersmith boasting a 4.47 per cent yield, healthy rental value and a more realistic average sale price than neighbouring postcodes.
In the rankings, Kensington (W8), Paddington (W2) and Chelsea (SW3) all dropped inside the 10 worst buy-to-let areas in London, whilst Hammersmith (W6), Westminster (SW1) and Tooting (SW17) made the top 10 best locations.
North London has dropped in overall yield into 2019, with five of the capital’s smallest yield postcodes. Highgate (N6) has performed the worst this year, with average property prices around £1.5 million but rental yields struggling at just 1.93 per cent.
Nearby Hampstead (NW3) might provide a better opportunity with similar property prices but a healthier rental yield of 4.20 per cent.
With a city as expansive and diverse as London, it can be tricky knowing where to look. Uncovering the next hidden gem takes research, local knowledge, and more than a hint of luck.
However, keep these five things in mind and you’ll be on the right track:
Have you recently invested in buy-to-let property in London? We’d love to hear from you below.
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