London sales market on the road to recovery ... thanks to the rental sector

A property platform that has chronicled the London sales market’s problems in recent years says the recovery will start in 2020 - and it will be down to renters.

The listings platform Home says improving rental yields will make London property more attractive to investors, whose purchases will then kick-start a recovery in the capital’s sales overall.

It particularly highlights Newham and Hammersmith & Fulham as triggering the renaissance. 

Home says last month in Newham the average rental yield was 4.9 per cent compared to 3.6 per cent in December 2017. This 1.3 per cent increase is one of the largest rise in any London borough. Meanwhile the average rent in Newham is £1,671, up 7.6 per cent on the previous year.

Home forecasts that the next hotspot for investors is set to be Hammersmith & Fulham, where rental yields increased by 1.2 per cent from 3.9 per cent in 2017 to 5.1 per cent last year. There’s also been a 6.2 per cent rise in rents.

The platform predicts that other emerging areas for investors include Hackney and Southwark, where rental yields grew by 0.7 per cent between 2017 and 2018.

Meanwhile keep an eye on Southwark which recorded the capital’s biggest uplift in rents over 2018, by 20.2 per cent. The average rent in this borough is now £2,532.

However, challenges remain and outer London boroughs will take longer to recover.

Home says that in Hounslow, Hillingdon, Harrow, Croydon, Waltham Forest, Richmond upon Thames and Barking & Dagenham rental yields stayed the same between 2017 and 2018.

Enfield in north London was the only borough to experience a fall in rental yields over the same period, of 0.2 per cent.

Home director Doug Shephard says: “You just can’t ignore the London property market’s remarkable ability to bounce back. History has shown us time and time again how the UK’s leading property market can burst back into growth after a period of correcting prices. 

“The rate of rental yield rises is surely the best analytical tool to pinpoint where the first ‘green shoots’ will emerge.

“Whilst it is encouraging that 32 out of 33 London boroughs are showing increased yield year-on-year, it is where they are growing most quickly that is of keen interest to investors. When they approach 6.0 per cent in 16 or more boroughs, demand in the London sales market will reignite.”