Property analyst SBA Property Management has identified Tower Hamlets as the highest-yielding borough for rental returns. 

The borough offers buy-to-let investors yields of 5.9%, up from the London average of 4.81%.

Average property values in Tower Hamlets stand at £456,375, against monthly rental costs of £2,244.

Habib Mogul, director at SBA Property Management, said: “After several years of uncertainty, London’s property market is again shaping up to be one of the UK’s most attractive investment opportunities.

“Falling mortgage costs and stable property prices combined with high demand for rental accommodation means buy-to-let property in particular offers great potential for returns.

“Historically, large deposits and borrowing costs have been a barrier for buy-to-let landlords looking to invest in the capital.

“However, our research shows that many of the highest-yielding areas are those with the lowest property prices, reducing the initial investment needed to secure a piece of London’s lucrative property market.”

Other opportunity areas identified by SBA Property Management are Newham, Barking & Dagenham and Greenwich, offering average rental yields of 5.23%, 5.06% and 4.96% respectively.

The news comes shortly after interest rates were cut by the Bank of England for the first time since March 2020, setting the stage for mortgage costs to fall over the coming months. With further cuts forecast in 2025, property investors will be in an even stronger position to buy.

In Barking & Dagenham – the London borough with the cheapest house prices – buy-to-let landlords would only need £51,060 for a typical 15% deposit to start earning above-average returns on their investment.

Tim Darwall-Smith, director at SBA Property Management, said: “In recent years, we’ve seen London’s property market buck the trend of rising house prices seen across the rest of the country. At the same time, rental costs in the capital have surged, putting buy-to-let landlords in an advantageous position.

“The easing of mortgage costs brings more relief to buy-to-let landlords, freeing up resources to make value-boosting renovations and deliver a better tenant experience. Ultimately, the investors with well-managed properties will be best placed to benefit from London’s highly profitable rental market.”

Via @PropertyWire