MARKET UPDATE
A Guide to London Property Rental Yields for Investors
May 2, 2025 • Author: Richard Bradstock
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With interest rates continuing to come down and lenders now slashing mortgage rates in the face of US tariffs, demand for London property is on the rise again. London is a safe, secure and an attractive investment for international property investors. This month, we even saw two-year fixed mortgages fall below the rates for five-year fixes. More advantageous lending rates are welcome to investors but they’re not the whole story.
To make smart investment decisions, it’s vital to understand one key factor: property rental yield. In this guide, we explore the latest rental yield trends for 2025, uncover the average rental yield in London, and highlight boroughs offering the highest rental yields in London for buy-to-let investors.
What Is Rental Yield?
Rental yield is a measure of the annual rental income from a property as a percentage of its purchase price. It’s a critical indicator for investors to assess potential returns.
Gross yield: Annual rent divided by the property purchase price.
In a competitive market like London, understanding rental yield helps investors find the right balance between income and capital appreciation.
Net Yield: Annual rent after deducting costs (maintenance, service charges, management fees).
Average Rental Yield in London – 2025 Update
As of early 2025, the average rental yield in London is approximately 4.3%, according to Zoopla and Savills research. However, this figure varies significantly by borough, reflecting differences in property values, regeneration activity, and tenant demand.
Average Rental Yield in London – 2025 Update
Source: Zoopla & Savills Research
London Property Rental Yields by Borough (2025)
London's Highest Rental Yields – 2025 Hotspots
East London
Barking, Dagenham, Newham (Stratford) lead the way.
Affordable entry points compared to West or Central London.
Massive tenant pool, driven by young professionals.
South London
Croydon is seeing a tech-led resurgence ("London's third city").
Lewisham and Woolwich are benefiting hugely from the Elizabeth Line.
Tottenham and parts of Edmonton (Haringey) are in major regeneration phases, offering high-yield opportunities for early investors.
Key Trends Driving London Rental Yields
Elizabeth Line Effect
Areas with access (Acton, Woolwich, Abbey Wood) to the cross-town Elizabeth Line have seen both house price growth and higher rents.
Regeneration and Urban Renewal
Massive projects in places like Nine Elms (Battersea), Old Oak Common (near Acton), and the Thames Estuary are unlocking rental growth potential.
Corporate Tenant Demand
Financial services (Canary Wharf), tech (Shoreditch, Stratford), and life sciences (King’s Cross) hubs are driving strong mid- to high-end rental demand.
Affordability Shift
As Central London prices remain sky-high, tenants are moving outward to Zones 3–5, pushing up rents in traditionally overlooked boroughs and also into neighbouring counties such as Surrey.
Rental Yield Trends for 2025 and Beyond
With high demand for rental properties, landlords in England benefit from strong yields, particularly in cities with growing populations and employment opportunities. Rental demand has surged due to high property prices making homeownership less accessible for many, ensuring a steady stream of tenants and reliable income for investors.
Rental Yield Trends for 2025
London's rental market remains one of the most dynamic and resilient in Europe — yields are expected to rise further in emerging and regenerating areas.
Rental Yields by Property Type: Apartment vs House
When investing in London property, it's important to understand that different property types generate different rental yield profiles.
Apartments (Flats)
Typically, apartments offer higher rental yields than houses, especially in densely populated, transport-connected areas.
One- and two-bedroom flats in East London or South London often deliver yields of 4.5%–5.5%, making them popular with first-time investors and tenants such as young professionals and students.
New-build apartments, particularly those near Elizabeth Line hubs or in regeneration zones, can also attract rental premiums, although service charges (for amenities and concierge services) slightly reduce net yield.
Houses (Terraced, Semi-Detached, Detached)
Houses generally produce lower gross yields (typically 3.5%–4.5%) but offer stronger capital growth potential and appeal to longer-term tenants like families.
In outer boroughs rental houses are in strong demand from tenants seeking more space, gardens, and proximity to good schools. Houses also tend to experience lower tenant turnover, helping investors minimise void periods over time.
Investor Tip: If your focus is maximising monthly rental income, apartments in regeneration hotspots may be the better choice.
**If you are aiming for both rental income and long-term capital appreciation, family houses in growth boroughs offer excellent potential.
Why Surrey Rental Yields Can Be Better Than London’s
The UK government continues to introduce policies that support the housing market, such as tax incentives for investors, Help to Buy schemes, and infrastructure improvements. Large-scale projects like Crossrail and HS2 enhance connectivity and increase property values in key regions, making now an opportune time to invest.
1
Lower Property Prices in Surrey
Surrey, while a highly desirable area due to its proximity to London, tends to have lower property prices compared to prime London locations. Lower purchase prices typically result in higher rental yields. As a result, gross rental yields of 4.5% to 6% are common in Surrey, whereas yields in more expensive parts of London (particularly in Zones 1 and 2) may average 2.5% to 3.5%.
2
Higher Demand for Commuter Properties
Surrey is a popular commuter belt for people working in London, especially in areas like Cobham and Claygate. The easy access to Central London (via train or car) at a much lower cost of living makes these areas attractive for tenants seeking more affordable rents and more space than they can get in London. This strong demand keeps rental yields robust.
3
Strong Tenant Demand
Many Surrey towns are known for their excellent schools, good amenities, and green spaces. This makes the area particularly attractive to families, students (in places like Guildford with its universities), and young professionals. For landlords, this means consistent demand for rental properties, particularly in areas with good transport links to London.
Comparing Rental Yields in Surrey vs London
Comparison of Average Rental Yields in London compared to Surrey
summary
In summary, Surrey offers higher rental yields in many areas compared to Central London due to its lower property prices, strong commuter demand, and family-friendly appeal. While London offers potential for strong capital appreciation, especially in regenerating boroughs, Surrey can be a more attractive choice for investors prioritising steady rental income and better initial yields.
If you're an investor looking for affordable entry points with strong long-term rental potential, Surrey could offer higher yields with the added benefit of a more relaxed lifestyle for tenants.
Final Tips: How to Maximise Rental Yield in London & the South East
Target regeneration zones before prices peak
Prioritise properties close to tube, train, or Elizabeth Line stations
Focus on tenant appeal: modern finishes, energy efficiency, outdoor space.
Work with experienced letting agents to minimise void periods
Consider property management services for overseas landlords.
The RPA View
With interest rates heading in the right direction and chaos across the Atlantic affecting US markets (New York rental yields on average range between 2-3%) London property rental yield remains a powerful reason to invest in the capital — but success comes down to selecting the right borough and property type. Whether you're seeking London buy-to-let yields above 5% or aiming for strong long-term capital growth, 2025 offers plenty of opportunity.
Want expert help finding the best buy-to-let opportunities? Get in touch with our team today to access exclusive listings and tailored investment advice. Based in the UK and with offices across the globe, RPA Group has been advising overseas property investors for over two decades, guiding our clients to make the best decision for them. We offer exclusive investment opportunities in London, Manchester and Birmingham along with other high performing areas of the UK.
Our full suite of services enables us to provide our clients with every conceivable facility they need when making a UK property investment: Due diligence, conveyancing, mortgage and tax advice and lettings and property management. What’s more, we provide monthly market updates and regular articles on the UK property market so please do subscribe to our mailing list for the most up to date appraisals of the market – and access to our latest investment opportunities. Find our most recent investments here.
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About the author
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals.
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