A Guide to the Best Rental Yields In London in 2021

When researching into the best areas in London to invest in a property to let, you will be keen to find out the sort of rental yield you can expect to enjoy in return.

A high rental yield ensures that your rental income covers the running costs of the property, from mortgage repayment to wear and tear.

What is rental yield and how is it calculated?

A rental yield refers to the value of rent you can expect to receive from your property in a year.

To cover all necessary expenses while allowing you to make a reasonable return on your investment, anywhere between 5-8% is considered a good rental yield. 

The rental yield is calculated by dividing your annual rental income by your total investment, then multiplying this by 100. As an example, if you buy a house for £200,000 and rent it for £900 per month, your rental yield is 5.4%.

What is the average rental yield in London?

Yields fluctuate from region to region. In greater London, the average yield is 4.6%. Some areas see investors making significant gains, so specific location and property choice make a big difference when looking to invest in London.

What is a good rental yield in London?

London’s rental market is huge and there is always a demand for property. However, a high level of properties at a high market price in London means that buy to let property in the area must work hard to return a profit. For this reason, a good rental yield in London is 6%.

Which areas have the best rental yields in London, UK?

So where is the best place in London to invest in at the moment? We’ve put together a list of the best rental yield areas in London:

Barking and Dagenham

Average rental yield: 6.4%

Average house price: £268,263

London’s cheapest place to buy and rent property also provides the highest rental yields in the city. Houses prices in these areas typically tend to be much more affordable.

Merton

Average rental yield: 6.3%

Average house price: £448,504

Encompassing popular areas like Wimbledon and Colliers Wood, Merton offers widespread appeal to both tenants and landlords. 

Sutton

Average rental yield: 6.2%

Average house price: £323,444

Sutton offers landlords a healthy return on investment as average house prices are low but with rents averaging out high. It is a very popular residential area away from central London for families to upsize.

Redbridge

Average rental yield: 6.2%

Average house price: £339,063

Redbridge is another borough that offers families good value homes within an easy commute of central London. 

Guilford

Average rental yield: 5.7%
Average house price: £354,245

Guilford is a commuter town, and one that has been attracting Londoners for quite some time, due to its beautiful homes, green space, and an excellent town centre. 

Harrow

Average rental yield: 5.5%

Average house price: £368,791

Harrow, Stanmore and Pinner all have outstanding local amenities and offer tenants excellent value for money.

Newham

Average rental yield: 5.1%

Average house price: £421,081

The east London borough of Newham is currently enjoying major investment and widespread development, making it a prime choice for buyers seeking a solid investment with good prospects.

Northolt 

Average rental yield: 5%

Average house price: £318,272

In the London Borough of Ealing, Northolt has excellent transport facilities to Central London and is a good prospect for families, with access to green space.

Haringey

Average rental yield: 4.9%

Average house price: £445,240

With its central location and desirability factor, Haringey is immensely popular with young London renters, while also offering outstanding areas for families.

Woking

Average rental yield: 4.8%

Average house price: £316,909

Growing in popularity as a commuter option, Woking offers more square feet for your money than central London and no fewer than eight golf courses to choose between. 

Enfield

Average rental yield: 4.8%

Average house price: £419,333

Well-served by rail, Overground and Piccadilly line services, the northern borough of Enfield is another suburban location attracting more attention from renters in recent years.

In Summary

In the age of comparison websites, finding out the rent prices for like-for-like properties is easier than ever. Therefore, if you have to charge extortionate amounts of money to make a return on investment, the property you’re looking at might not be the best one for you.

The current stamp duty holiday – on the first £500,000 of purchases until 31st March – was put in place as a bid to stimulate the property market in the wake of coronavirus, and has reassured investors that there is still money to be made in the buy to let sector.

If you’re looking for the perfect location to buy to let in London, calculating the rental yield will give you a great idea of whether it will be a worthwhile investment.