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Rental returns in London are on the rise: Chestertons

Rental yields in London have increased compared to this time last year and could continue to rise, according to Chestertons.

The letting agent reports that despite rents still being under some downwards pressure in some prime central locations, there are pockets throughout London where rents have seen considerable growth.

According to Chestertons’ research, Chiswick has seen the biggest surge in gross rental yields over the past year, with growth of around 30 per cent, from 3.3 per cent to 4.3 per cent, while Tower Bridge and Covent Garden have seen yields increase by 17 per cent and 15 per cent respectively. Both Canary Wharf and Wandsworth have seen an annual growth of 12 per cent.

Other parts of London that have seen a more modest rise (between 6 and 8 per cent) include Islington, Fulham, Notting Hill, Greenwich, Wandsworth, St Johns Wood and Battersea.

As an example, the annual rent for a four-bedroom flat in Battersea was £37,200 in 2017 but this has now increased to £40,320, giving the landlord a rental yield of 5 per cent, and representing an increase of 14 per cent year-on-year.

A one-bedroom flat in Battersea currently has an annual rent of £22,452, providing a 3.2 per cent return, an increase of 18 per cent year-on-year.

Chestertons head of lettings Richard Davies says: “There is real a shortage of rental properties in the capital at the moment and there are fewer and fewer coming onto the market as many landlords have started to react to recent tax changes by restructuring or selling their buy-to-let portfolios. This is leading to severe shortages in many locations, which is in turn leading to increases in rental prices.

“There are several reasons why now is a good time for landlords to invest again. Rents achieved in many areas have increased beyond asking price and gross yields have improved and importantly, tenant demand remains resilient.”

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