London property prices have long driven the soaring UK market home value but whilst the capital city achieves faster (and first) growth in house value, rental yields have often underwhelmed due to the huge prices that people pay for their properties.

Here we take a look at the leading areas for rental yield in London and the changes before and after COVID pandemic which has seen a surge of tenants leaving London for further afield.

Research by leading rental portal, Rentd, has shown that the pandemic decline in rental yields across the London market continued in 2021, but a brighter year ahead is forecast for the capital’s landlords as life returns to London in 2022.

Rentd analysed the average rental yield available to London landlords based on both rental and house price values in 2021 and how the market has performed during the pandemic.

The research shows that 2021 saw yet another decline in rental profitability across all areas of the London market.

Rentd’s analysis shows that the average rental yield fell to 3.7% last year, down -0.3% year on year and a drop of -0.6% when compared to pre-pandemic levels.

The impact of Covid-19 on the London rental market remains clear, with the City of London seeing one of the largest annual declines along with Westminster at -0.8%.

The City of London has also seen the largest decline when compared to pre-pandemic yields, with a -1.5% drop.

When it comes to the boroughs currently offering the strongest returns, East London is leading the way.

Both Newham and Tower Hamlets are home to an average yield of 4.5%, with Barking and Dagenham (4.4%), Greenwich (4.1%), Lambeth, Hounslow and Southwark (3.8%) also sitting above the London average.

Founder and CEO of Rentd, Ahmed Gamal, commented: 

“Although 2021 was certainly a better year for the London rental market, Covid-19 continued to stifle demand from both domestic and international tenants, as restrictions on travel and advice on working from home remained in place.

As a result, rental values continued to fall as landlords looked to secure a tenant and recoup some of their losses after a very tough 2020 and this was the driving factor behind a further decline in rental yields, most notably across the City of London and Westminster.

The good news is that 2022 is already looking far more promising. London has reopened for business and we’ve already seen a sharp uplift in tenant activity which is helping to rejuvenate rental values at quite some pace.”

Rentd calculated the average rental yield in each year based on house price data from the UK House Price Index and private rental values from the Office for National Statistics.

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Daniel Peacock

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