Terraced houses are the most lucrative property type for buy-to-let investors in London, offering the highest rental yields in the capital at 5.37%, according to new research by SBA Property Management.
London’s property yield breakdown
Drawing on data from August 2024, the analysis highlights the rental yields of different property types in London, offering key insights for property investors:
- Terraced Houses: Average price: £579,743 | Average monthly rent: £2,594 | Yield: 5.37%
- Flats: Average price: £443,073 | Average monthly rent: £1,876 | Yield: 5.08%
- Semi-Detached Houses: Average price: £686,952 | Average monthly rent: £2,695 | Yield: 4.71%
- Detached Houses: Average price: £1,036,179 | Average monthly rent: £2,690 | Yield: 3.11%
While detached homes offer spacious luxury, their high purchase costs deliver the lowest yield, making them less attractive to investors focused on returns.
Rental market poised for growth
The London rental market remains a promising avenue for investors, bolstered by rising demand and anticipated interest rate cuts in 2025. Goldman Sachs predicts rates could fall as low as 2.75% by autumn 2025, making financing more affordable and potentially triggering an uptick in investment activity.
Rental prices in the capital are also set to increase between 3% and 5% annually in 2025, outpacing the UK average of 2% to 4%, creating additional opportunities for landlords to capitalise on rising rents.
Five-year trends confirm terraced and flat dominance
The analysis also highlights the stability of terraced houses and flats as top-performing investments over the last five years:
- Terraced Houses: Average five-year yield: 4.88%
- Flats: Average five-year yield: 4.47%
- Semi-Detached Houses: Average five-year yield: 4.32%
This consistency underscores the enduring appeal of these property types in both London and across England.
Nationwide comparison
The research also revealed that terraced housing offers the best yields nationally, averaging 5.80%, followed by flats at 5.58%. While London yields are slightly lower due to higher property prices, the capital’s strong rental demand ensures steady returns for investors.
Expert advice for investors
Tim Darwall-Smith, director at SBA Property Management, says:
“As mortgage costs fall and demand for rented accommodation continues to increase, now is the perfect time for investors to look at the London property market.
“Terraced housing consistently delivers strong rental yields, making it the standout choice for investors. By staying informed on property types and emerging opportunities, landlords can maximise their returns as interest rates decrease.”
For investors eyeing long-term stability and growth, London’s rental market remains a resilient option, with terraced houses and flats offering the strongest opportunities for return on investment.