Are you thinking about investing in property in the capital of England? Explore the best rental yields in London with our comprehensive 2024 investor’s guide.
With a current population of over 9.5 million people, the vibrant and cultural city of London is a fabulous place for property investors to earn a great return.
The ever-increasing house prices, rents and rental demand make it a fantastic place to invest in long-term rental properties and short-term rental properties alike.
Read on to find out the best buy-to-let areas in London, and where the best rental yields in London can be achieved.
Table of Contents
- Where to invest in property in London?
- Is buying real estate in London a good investment?
- What is the average rental yield in London?
- Why buy real estate in London?
- Can foreigners buy real estate in London?
- What is the tax on rental income in London?
- Is now a good time to buy real estate in London?
- Short, mid or long-term?
- Invest in London with GuestReady
1. Where to invest in property in London?
Here, we reveal what we consider to be ten excellent parts of London for property investment.
According to research from Track Capital, the highest rental yield in London is Greenwich SE28, with a yield of 6.10%. It is followed by Thurrock RM19 (5.90%), Camden NW8 (5.80%), Barking and Dagenham IG11 (5.60%), and Southwark SE17 (5.60%).
The worst postcodes by yield in London are Westminster W1 (2.40%), Kensington and Chelsea W8 (2.50%), Haringey N10 (2.60%), Redbridge IG5 (2.70%), and Dacorum WD4 (2.80%).
- 6.10% rental yield
- £1,627 average monthly rent
The Royal Borough of Greenwich was formed in 1965 in southeast Greater London. Famously, the borough’s location is the Greenwich prime meridian, better known as the location on which all coordinated universal time is based. The borough has an estimated population of 289,254, and it lies along the south bank of the river Thames, neighboured by Deptford and Thamesmead.
The average annual yield is 6.10% in SE28, making it the highest-yielding postcode in London in 2024. As such, it’s an attractive option for would-be buy-to-let investors in the capital. Properties here have an average buy price of £320,584 and command a monthly rent in the region of £1,627.
- 5.90% rental yield
- £1,153 average monthly rent
Though located in Essex, Thurrock is regarded as a unitary authority area with borough status, and it’s a good option for anyone looking for a buy-to-let investment. Thurrock has a population of approximately 175,500 people who benefit from excellent transport links into the heart of London. There are more than 20 direct trains daily into London, with a journey time of about 30 minutes. London City Airport is nearby, while the M25 is easily accessible from Thurrock.
In terms of buy-to-let value, the rental yield in Thurrock RM19 is 5.90%, which represents a five-year increase of 14%. Buying here is significantly lower than in Greater London, with the average house price at the start of 2024 in the region of £232,934. You can expect a monthly rent of around £1,153 in Thurrock.
- 5.80% annual yield
- £5,396 average monthly rent
With an approximate population of 270,000 people and located in Central London, Camden is home to many well-known London attractions such as The National British Museum, The British Library, London Zoo, The Roundhouse and Camden Market.
The average rental yield for properties in Camden NW8 is 5.80%, though it is one of the more expensive postcodes in London, with an average house price of £1,112,235.
Camden is a hugely popular and vibrant area with good potential for Airbnb and other short-term rental opportunities. Are you planning on starting a short-term rental business in London? Check our London Airbnb landlord guide.
Buy-to-let Barking and Dagenham
- 5.60% annual yield
- £1,637 average monthly rent
The London Borough of Barking and Dagenham has been a borough in London since 1965 although not always under the same name. It has a current population of approximately 180.000 people and is north of the River Thames, with a total area of just over 36 km².
The average annual yield in Barking and Dagenham IG11 is 5.60%, making it one of the highest-yielding areas in Greater London for property investors and one of the best buy-to-let areas in London. It’s also one of the cheaper London boroughs to buy property, with an average house price of £347,762.
- 5.60% annual yield
- £2,439 average monthly rent
Located in south London, the Borough of Southwark was created in 1965. Famously, Southwark is home to London Bridge, The Shard, and Tate Modern, making it a popular spot with tourists looking for Airbnb rentals. Southwark comprises 11.14 square miles and has a population of approximately 306.374.
Southwark SE17 offers an annual yield of 5.60%, with monthly rentals fetching an average of £2,439. The average buy price is currently £525,337. Given Southwark’s proximity to many of London’s biggest attractions and its enviable riverside location, it represents a solid buy-to-let proposition in 2024.
2. Is buying real estate in London a good investment?
The short answer? Yes. Buying real estate in London is a great investment because of continually increasing property prices, growth in employment and ever-increasing rental demand, despite the increasing popularity of remote working.
2024 is a great year to buy in London
House prices in London are anticipated to fall by about 4% in 2024. What’s more, with a general election likely, we can also expect interest rates to fall in 2024, making this a great year to buy a house in London, particularly in the boroughs listed above. However, the fall in prices in 2024 will not likely cause a major long-term issue for investors.
Five-year projections show that by 2028, the price of property in London will likely be worth an average of £70,376 than it is today. So, if you can invest in the London housing market, 2024 will likely be a great year to make your move.
Now that employees are gradually returning to office environments, employment is at its highest ever. Despite the attractiveness of remote working, regions in Greater London like the City of London still provide an enormous number of jobs for London residents.
Increasing Rental Demand
With rising employment rates comes increasing rental demand. For long-term and mid-term lets, increasing employment means many more people looking for properties. An increasing number of young professionals are choosing to rent as an alternative to buying property, and an ever-booming number of tourists are present, excellent opportunities for short-term rental accommodation.
3. What is the average rental yield in London?
The average rental yield in Greater London is currently 4.0%, making it the seventh-highest-ranking region in the UK for buy-to-let investors. Rental yields in Greater London outperform those in the South West and South East and are comparable to those in the East Midlands. The highest average rental yield in the UK can be found in Scotland, where yields average out at 5.70%.
4. Why buy property in London?
Easy access to funding, potential for huge capital appreciation, rising rents and a stable demand, are just a few of the reasons why more and more property investors are choosing to buy property in London.
Access to Funding
With low-interest rates and a large number of lenders in the market, mortgages are fairly easy and cheap to come by at the moment, which is one reason why investors are choosing to put their money in property, particularly in London. With many lenders joining the market, increased competition means that borrowing is relatively cheap, despite recent increases in interest rates.
Capital appreciation is always promising for a capital city like London. With long-term forecasts predicting ever-increasing house prices and an average property price of £537,000, London boasts many opportunities for investors from across the globe to benefit.
In addition to rising house prices, rents are growing in most London areas. At the time of writing, Westminster is the most expensive London Borough for rent, fetching an average of £2,925. Second in line is Kensington and Chelsea, with an average monthly rent of £2,903. In contrast, Sutton, Havering, Croydon, and Bexley all offer the lowest rents in the capital, with averages of less than £1,300 per month.
Demand has always been very stable in the capital, and now it’s back on the rise after the Coronavirus pandemic. Demand is always strong for long-term rental properties, with an estimated 5.8 million jobs available in the capital. There is ever-increasing demand for short-term rental and holiday properties, with the city regularly attracting over 20 million visitors per year.
5. Can foreigners buy real estate in London?
Yes, foreigners are able to buy real estate in London. However, if they are not buying the property out of their own pocket then they may need to pay a larger deposit (up to 40% in some cases) and may only be able to secure mortgages with higher interest rates. Foreign investors should speak to a qualified mortgage broker for more information about their funding options.
6. What is the tax on rental income in London?
If you invest in property in the UK, you will be subject to Stamp Duty Land Tax, Income Tax, Capital Gains Tax and Inheritance Tax. Property investors should speak to a qualified tax professional for more information about their tax requirements and liabilities related to rental income and the sale of investment properties in the UK.
Stamp Duty Land Tax
Owners of UK property are subject to Stamp Duty Land Tax when they buy a freehold or leasehold property, a property in a shared ownership scheme or if they are transferred land or property in any other way, for example, they take on a mortgage. Different rates apply depending on whether you are a first-time buyer, UK resident or second homeowner.
Owners of rental properties are subject to income tax, just like most people in the UK, at a rate between 20% and 45%. Investors will receive the first £1000 of property income tax-free and will be taxed on the rest of their income in accordance with their earnings.
Capital Gains Tax
UK and foreign investors may also be subject to capital gains tax when they sell a property that is not their main residence.
Any proceeds from a buy-to-let investment, be it rental income or the asset itself, are subject to inheritance tax at 40% upon death, provided they do not fall within any allowances.
7. Is now a good time to buy real estate in London?
Yes, the potential for capital appreciation, increasing rents and increasing rental demand in London makes it a great time for property investors to enter the market or increase the size of their portfolio.
8. Short, medium or long-term?
In London, residential and academic areas of the city are traditionally better suited to long-term and mid-term rental investments, whereas the more touristic areas of the city are better suited to short-term rental investments.
GuestReady is a short-term rental management company that can help property investors predict and manage their estimated returns for their property investment in London. GuestReady assists property investors with the management of their short-term rental businesses by offering a 24/7 communication service with guests in several languages, reservations management, online advertisements optimisation, cleaning and maintenance and décor and professional photography.
Short-term rental opportunities in London allow investors to achieve much greater returns than they would with a long-term rental strategy while providing them with the flexibility to stay in the property themselves as and when they need to.
GuestReady helps to make this form of renting as hassle-free and passive as possible, by implementing key changeover systems that allow for seamless transitions between guests, something which is important for those important five-star reviews.
London is a great place to invest for a number of reasons. The increasing house prices present a great opportunity for capital appreciation while increasing demands and rents make for strong cash flow potential.
9. Invest in London with GuestReady
GuestReady has years of experience working with property investors. We know where the best real yields and we help investors by providing them with insightful information on their investments and by presenting them with short-term rental management plans for their hassle-free new business.