The Commuter Towns Beating London for Rental Yields

The Commuter Towns Beating London for Rental Yields
Oct 26 , 2020

Is London still an attractive proposition for landlords in terms of rental yields post-lockdown or have commuter towns come to the fore as tenants, whose needs have changed due to Covid-19, driven up demand – and prices – in London’s suburbs thereby providing a more profitable opportunity for buy-to-let investors? Propertista takes a look.

At first, it was thought that Londoners would leave the UK’s capital city in their droves in search of properties offering more space (for a home office and the obligatory outdoor space) after the strict Covid-19 lockdown made them reconsider their lifestyle and property needs. The Coronavirus pandemic lockdown forced Brits to remain within the confines of their homes for weeks on end for their own safety with limited access to outdoor space (apart from their own gardens and their daily exercise) and working from home became the ‘new normal’. After the lockdown, it seemed London residents would be tempted to look outside of London for a more spacious rental property with outside space.

However, according to recent research, the predicted mass exodus from London following the Coronavirus lockdown has not materialised; research from property portal Zoopla found that rather than a long-term seismic shift in consumer behaviour, there has only been a moderate, short-term adjustment in buyer and rental demand in response to the lockdown.

Commuter towns or London Boroughs – Where to Find the Best Yields?

So, if not everyone is deserting city life, where can landlords expect to achieve the best yields? Commuter towns or London boroughs? The answer isn’t as clear-cut as you might think…

New research ranking rental yields across London against its main commuter hubs to see which are currently proving the best investment for landlords in terms of rental yields has found that London is still clinging onto its top-ranked status with London boroughs securing six out of ten of the top average performing yields.

The research by lettings management platform Howsy found that the London borough of Tower Hamlets in east London is currently the best location to own a buy-to-let investment out of the London boroughs and commuter towns assessed (see table below) as it produced an impressive average rental yield of 4.7 per cent.

The other London boroughs in the research’s top ten, which calculates the yields based on average house prices and average monthly rents for the area, are Newham in north-east London with an average yield of 4.5 per cent, Barking and Dagenham in east London and Lambeth in South London in joint fifth place with yields of 4.4 per cent and Greenwich in the south-east of London achieving an average yield of 4.3 per cent.

However, there are some commuter towns that have returned higher yields than the majority of the London boroughs with Harlow (to the north of London) and Reading (to the west) ranked second and joint third out of the 53 towns and boroughs measured, achieving yields of 4.6 per cent and 4.5 per cent respectively.


Overall, the current average London yield of 4.1 per cent still reigns over the City’s 20 major commuter hubs, which overall return an average yield of 3.7 per cent. That said, just seven London boroughs are home to a current yield at or above the Capital’s average, with several performing on a similar level to their commuter town peers.

There are also some commuter further towns returning a yield at or above that of the London average such as Luton to the north of London (4.2%), Crawley in West Sussex (4.2%) – both taking a top ten ranked position – as well as Slough to the west of London and Dartford in Kent both returning average yields of 4.1 per cent.

So, for the time being, at least, the capital remains a stronger market overall when it comes to investing in a rental property. Howsy’s Founder and CEO, Calum Brannan, agrees commuter towns are as popular as ever, however, he doesn’t foresee London’s popularity changing any time soon, he commented: “The commuter belt has always been popular amongst tenants searching for rental affordability within touching distance of the capital, but with many now facing more time working from home this trend looks set to intensify.

“However, landlords won’t be leaving London for the commuter hills just yet as this demand is yet to have a notable lift on rental prices and, as a result, yields.”

As with all rental investments, location is always a key factor when adding to your portfolio. And although London always has a strong demand, research often finds that higher yields can be found in other parts of the country away from London and its commuter belt. For example, investing in buy-to-let properties near a university campus can return much higher yields than in London. In fact, 17 of the UK’s top 20 postcodes for buy-to-let rental yields were found near a university campus in one recent study.

Source Propertista