Analysis suggests London residential property market will recover next year due to improving rental yields
London’s house price recovery is set to start in the boroughs of Newham and Hammersmith and Fulham due to booming rental yields in these two locations, according to a new analysis.
Property website Home.co.uk predicts that the slump in the capital’s housing market will come to an end during 2020 due to improving rental yields making property more attractive to investors.
Its research suggests that this turnaround is likely to start in Newham, where in Dec 2018 the average rental yield was 4.9% compared to 3.6% in the same month in 2017. This 1.3% increase is the largest rise in any London borough apart from the City of London, where a 1.5% rise was observed. The average rent in Newham is £1,671, up 7.6% on the previous year.
The next hotspot is set to be Hammersmith and Fulham, where rental yields increased by 1.2% from 3.9% in 2017 to 5.1% last year. This promising increase comes amid a 6.2% rise in rents in this West London borough between 2017 and 2018, the analysis report says.
Other emerging areas for landlords include Hackney and Southwark, where rental yields grew by 0.7% between 2017 and 2018 and outside of the City of London, Southwark recorded the biggest uplift in rents over 2018, by 20.2% with an average rent of £2,532.
There was a 0.6% rise in yields over the same period in the City of Westminster and Tower Hamlets while rents in Westminster rose by 12.1% last year and the average rent stands at £5,505, while rents in Tower Hamlets rose by 10.1% and the current average rent is £2,350.
But the housing recovery is set to take longer in many outer London boroughs, it adds. In Hounslow, Hillingdon, Harrow, Croydon, Waltham Forest, Richmond upon Thames and Barking and Dagenham rental yields stayed the same between 2017 and 2018. Enfield in North London was the only borough to experience a fall in rental yields over the same period, of 0.2%.
Director Doug Shephard said one just can’t ignore the London property market’s remarkable ability to bounce back. History has shown time and time again how the UK’s leading property market can burst back into growth after a period of correcting prices. The rate of rental yield rises is surely the best analytical tool to pinpoint where the first green shoots will emerge.
He added that whilst it is encouraging that 32 out of 33 London boroughs are showing increased yield year on year, it is where they are growing most quickly that is of keen interest to investors. When they approach 6% in 16 or more boroughs, demand in the London sales market will reignite.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.