Outer London home to lowest average BTL rental yield, research finds

Outer London is home to the lowest average buy-to-let (BTL) rental yield of all regions in the UK, at 4.8%, according to research from Howsy.

The lettings management platform suggested inner London has a BTL rental yield only slightly higher at 5%, the second-lowest average yield of all regions along with the South-West.

Howsy, which has analysed investing in London’s BTL sector, suggested that rental yields are the “main gauge of BTL profitability”, and the group indicated that while the higher cost of investing may dent yields, the average rent earned per month is still “by far” the highest in inner and outer London at £2,453, and £1,697 respectively.

The research showed the East of England, South-East and South-West were the only other regions to see rental income tip over £1,000 a month on average.

Howsy also revealed the average landlord in inner London has an average portfolio of 7.7 properties, climbing to 7.9 properties in outer London. This is lower than landlords in the South-East, Yorkshire and the Humber, North-East and North-West, although in inner London, the average BTL portfolio is worth a £4.5m on average, the highest of any region. In outer London, this drops to an average of £3.3m, but the group suggested this remained considerably higher than any other region.

The figures also showed that in inner London, the total amount owed per landlord through BTL mortgage borrowing is £1.1m, falling to £811,000 in outer London. Howsy said this equates to just 24% of the average BTL portfolio value in both areas.

“When investing in a BTL there’s a whole host of criteria to consider above and beyond the yield available,” Howsy founder and CEO, Callum Brannan, commented.

“Demand plays a huge part in the success or failure of your investment and so other criteria such as void periods should be carefully considered. It’s all well and good securing a higher yield, but if your property remains empty for a larger proportion of the year this will dent your profitability.

“Tenants can also have an impact while in situ and a tenant that isn’t paying can be tricky and expensive to get rid of while reducing your profit margins at the same time.

“While this is a problem throughout the market, London offers the best chance of a better quality tenant and all things considered, the capital is one of the best segments of the BTL market.”

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