Rental yields in the capital – East London continues to lead the way

Those investors looking to join the pandemic bounce-back may be asking where the best places in London are to consider for future investment.

With vaccination rates finally helping to achieve the cautiously confident reopening of the country, investors’ confidence is reawakening and market activity is heightening.

This year has brought a significant rise in demand and a substantial fall in supply in the rental market. For example, between August 2020 and August 2021, the number of tenants looking for a rental property shot up by 55%, while the number of rental properties available declined by 58%.

Although London suffered during the worst days of the pandemic as people looked to live and work elsewhere, the capital is slowly but surely starting to bounce back as tourists, students, young professionals and workers return for work, leisure and entertainment.

But where exactly offers the best rental yields in London, where good yields are typically harder to come by because of the higher initial buy-in costs?

Well, Portico’s Q4 data analysis of its interactive rental yield map found that East London continues to represent the best rental yield opportunities in the capital.

The East London neighbourhood of Creekmouth has, over the last year, had one of the lowest median house prices across Greater London at just over £300,000 – in addition to the best current rental yield in the capital at an impressive 6%.

Due to its proximity to one of the largest estate regeneration projects in the Thames Gateway, developers have been working alongside local businesses to improve the residential environment of the area and promote job growth. 

It’s East London where we must look to for many of the year areas that top the list of the best rental yields in the capital, with Barking holding top spot last quarter and currently coming in at a 5.9% yield, in joint second place with Cranbrook.

Barking has benefited more than most from considerable redevelopment in recent years, including extra homes close to the mainline station, as well as new business and retail spaces. The town, which sits on the historical borders of Essex and East London, also currently offers low average property prices by general London standards, with the average value sitting at around £350,000.

It also sits close to the many of the stations that will sit on the long-delayed Elizabeth Line, which is finally set to open fully next year, and has undoubtedly benefitted from the much-talked-about Crossrail effect on house prices and rents.

Third on the East London table comes Little Heath, ever so slightly below Creekmouth and Barking with an average yield of 5.8%. Little Heath is close to the busy A12 motorway, but regardless of this is designated as a conservation area and manages to maintain a charming village atmosphere. 

As for the rest of the capital, the brilliantly named Freezywater and Ponders End in North London both offer a healthy yield of 5.7%, while the best yield in the west is still 5.1% in Hayes and Harlington (also with a station on the new Crossrail line). Meanwhile, in the south, West Wickham takes the top spot at 4.8%.

While the north’s top performer of Freezywater currently lacks good transport connectivity at present, Enfield station is close by and is one location that would reap the benefits of the north to south Crossrail 2, if that ever comes to fruition.

“There may be signs in some regions of increasing inventory as we head out of the pandemic, but it will be some time before any real balance is restored in the market. While London remains a strong sellers’ market overall, the demand for rentals is high as the country reawakens and the outer boroughs of the capital once again become a highly desirable location for professionals and families alike,” Sophie Durkin, Portico’s regional director, said.

“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.”

Portico says that it has been a turbulent time for landlords and the economic uncertainty has made it difficult to know how and when to act. But the easing of restrictions coupled with many strong rental yields on offer across London is signalling the start of a healthy return to investing, especially to the east of London, the firm – previously known as Edmund Cude and one of the oldest operating in the UK – said.

To find the optimal buy-to-let areas across the capital, landlords and investors can use Portico’s rental yield map.

With this tool, investors can instantly drill down to the areas representing the highest ROIs, from postcode comparisons, to even honing in on street-based figures.