Residential rental yields in London are on the rise, new analysis suggests

Rental yields in London have increased compared to a year ago and could continue to rise, according to new research.

Despite rents still being under some downwards pressure in some prime central locations, there are pockets throughout London where rents have seen considerable growth, according to the study from letting agents Chestertons.

Chiswick has seen the biggest surge in gross rental yields over the last year, with growth of around 30%, from 3.3% to 4.3%, while Tower Bridge and Covent Garden have seen yields increase by 17% and 15% respectively. Both Canary Wharf and Wandsworth have seen an annual growth of 12%.

Other parts of London that have seen a more modest rise of between 6% and 8% and include Islington, Fulham, Notting Hill, Greenwich, St Johns Wood and Battersea.

For example, the annual rent for a four bedroom flat in Battersea was £37,200 in 2017 but this has now increased to £40,320, giving the landlord a rental yield of 5%, and representing an increase of 14% year on year.

A one bedroom flat in Battersea currently has an annual rent of £22,452, providing a 3.2% return, an increase of 18% year on year.

‘There is real a shortage of rental properties in the capital at the moment and there are fewer and fewer coming onto the market as many landlords have started to react to recent tax changes by restructuring or selling their buy to let portfolios,’ said Richard Davies, head of lettings at Chestertons.

He explained that this is leading to severe shortages in many locations, which is in turn leading to increases in rental prices.

‘There are several reasons why now is a good time for landlords to invest again. Rents achieved in many areas have increased beyond asking price and gross yields have improved and importantly, tenant demand remains resilient,’ he added.