Top 10 London buy to let hot spots revealed

Southwark offers the best yields in London for buy-to-let investors, a high street bank’s study reveals.

The borough offers a gross rental yield of 6.15% on an average property price of £401,405 and average monthly rent of £2,058, according to the figures from HSBC.

Newham was the second-best area in the capital with yields of 5.90%, followed by Enfield with 5.51% and Brent with 5.39%.

Generally, rental yields in London are modest because of high property prices. Tenant demand is high and achievable rents are strong, so landlords who can afford to invest in the capital usually benefit from fewer void periods and a good monthly income.

Compared to the national picture, London’s private rental sector does not offer some of the best returns. Southwark, the best area in the city, ranking 13 in the overall list. Affluent areas like Hammersmith, Fulham, Kensington and Chelsea, chart at 43 and 50. They offer returns of just 3.42% and 3.34% respectively because of the high cost of property in the boroughs.

At the top of the national table Southampton is the most lucrative area with rental yields of 7.82% – far above even the best in London.

With half of the London boroughs offering yields of more than 5%, buy-to-let investment in the capital could still provide better returns than many savings options. For landlords who can afford the initial outlay the capital can still be a lucrative market.

But Peter Dockar, head of mortgages at HSBC, urges investors to research their options as popular areas may not necessarily offer the best returns. When choosing a buy-to-let property landlords must also consider factors such as tenant demand, achievable monthly rent, their costs and charges and how easy it will be to market and find tenants for the property.

Top 10 London BTL Hotspots by Rental Yield

Source: HSBC April 2013