Central London yields below 4%

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by Gill Montia

Central London residential rental yields have fallen below 4%.

New research from Knight Frank shows the average gross yield in prime central London down to 3.79% in June.

According to the estate agent, rents in central London have fallen by 1.9% in the past three months but prices rose 3.7% during the same period, with the subsequent downward pressure on yields.

On an annual basis rents are now an average 19.3% lower than they were in June of last year and sale prices have fallen 17.2%.

The more expensive properties have borne the brunt of the rental falls.

Rents on properties costing up to £500 per week have fallen only 11.3% over the past year, while those costing over £1,500 per week have tumbled 27.3%.

The firm’s head of residential research, Liam Bailey, comments: “Falling rents have resulted from a dramatic growth in the volume of available stock - as homeowners decided to keep surplus property rather than sell into a difficult market … while the volume of tenancies agreed has risen by anything between 15% and 30% across central London - stock levels in some cases have risen by 100% to 200%.”

Investors looking to add to their London residential rental portfolios are therefore advised to pick their stock carefully and plan well ahead.