Buy-To-Let London: Where To Invest For Maximum Returns

London is a tricky place to find the best areas for buy-to-let properties. The city is not just one property market but many property markets, and those markets overlap to create complex sub-markets.

However, London is a buzzing, metropolitan city with over 8 million residents, of which almost 40% rent a property. The demand for rentals is set to soar, with graduates and young professionals continuing to flock to the capital.

So, where are the best buy-to-let areas in London? Data from Portico shows there are still pockets of the city that deliver strong rental yields, meaning careful, smart choices by investors can generate excellent returns.

The best buy-to-let opportunities offer a balance of rental yield and five-year price growth. Using this calculation, the top three buy-to-let postcodes in London are:

1. E9, covering parts of Hackney and Homerton, with rental yields of 5.4% and a five-year price growth of 20%.

2. E6, covering East Ham, with rental yields of 5.4% and a five-year price growth of 18%.

3. SE28, covering Thamesmead and stretching to Woolwich, with the highest rental yield of any postcode in the capital at 6.1% and a five-year price growth of 12%.

Other areas to consider include:

- Plaistow and Upton Park (E13)

- Upper Edmonton (N18)

- Colindale and Ealing

- Elephant & Castle and Paddington

- Nine Elms

Fringe areas like Colindale and Ealing

When considering investing in London's property market, it's important to research the market thoroughly and pay attention to fringe areas that are expected to increase in popularity. Two such areas are Colindale and Ealing, which offer attractive investment opportunities.

Colindale, located in the London borough of Barnet, has seen significant development in recent years. The Colindale Gardens development, for example, offers a range of studio to four-bedroom apartments and townhouses, along with cafes, retail spaces, and a residents-only gym. The area benefits from good transport links, with Colindale Underground station nearby. The Brent Cross Cricklewood Masterplan, a $4.5 billion regeneration project, is also expected to benefit Colindale. This project includes the regeneration of Brent Cross Shopping Centre and the creation of 6,700 new homes.

Ealing, in West London, is another promising area for investment. With a diverse range of property options, Ealing offers something for everyone. For those seeking a more affordable option, one-bedroom apartments in Ealing can be purchased within the €300,000-€400,000 range. For those with a higher budget, the area also offers luxury apartments and suites, such as the Royal Arsenal Riverside development, which provides convenient transport links and access to the River Thames. Ealing is also set to benefit from the Old Oak and Park Royal development project, which will bring up to 25,000 new homes to the area.

Both Colindale and Ealing present excellent buy-to-let investment opportunities. By investing in these fringe areas, you can get in early and boost your profits as prices rise with further development and regeneration.

Zone 1 neighbourhoods like Elephant & Castle and Paddington

Paddington, on the other hand, offers prime office spaces and short-term residential lets. The area boasts excellent transport links, including the Paddington Basin and nearby Hyde Park. While commercial properties are abundant, there are also residential options, including apartments, houses, and mews.

When considering investing in these areas, it is essential to evaluate rental yields and price growth. While Zone 1 neighbourhoods are desirable, they may also come with higher purchase prices and rents. Therefore, conducting thorough research and data analysis is crucial to making informed investment decisions.

Developments near transport hubs, e.g. Crossrail stations

London's new £15.7 billion transport project, Crossrail, is expected to have a significant impact on property prices and rental demand in areas surrounding the new stations. Transport links and infrastructure have historically played a key role in property price performance, and Crossrail is predicted to be no exception.

The new line will connect London's Docklands, City, and West End to Heathrow Airport, Berkshire, and Essex, with 40 stations across 21 London boroughs. The improved transport links will make areas in Greater London more accessible, effectively making them more central. This will likely lead to an increase in property prices and rental demand in these areas.

Tottenham Court Road

Tottenham Court Road is one of the central Crossrail stations expected to become a key property investment location. The area is undergoing significant redevelopment, including the addition of premium retail, office, and residential spaces, as well as a new theatre and upgraded public spaces. The GVA has identified Tottenham Court Road as one of the four central Crossrail stations with the greatest potential for property investment.

Canary Wharf

Canary Wharf will be one of the largest Crossrail stations, with a 256-metre station box linking Canary Wharf and Poplar. The area is already a popular investment location, with ongoing development projects. Canary Wharf is also just a short tube ride from the popular West End shopping district, making it attractive to young professionals and couples seeking affordable living.

Acton Mainline

Acton Mainline is an area to watch, with journey time savings of about half an hour. Transport infrastructure improvements are making a noticeable difference in Acton, and there are several desirable areas to live, such as Poet's Corner, the Mill Hill Conservation Area, and the Bedford Park borders. The average two-bedroom, purpose-built property in Acton stands at a reasonable £400,000.

Ilford

Ilford will be added to the Tube map with the arrival of Crossrail, and it is already undergoing gentrification as a result. The area offers excellent value, with the average price of a two-bedroom property at a reasonable £280,000. New build apartments, trendy eateries, and bars are springing up in the area, indicating that a wave of new investors and tenants will soon be moving in.

Whitechapel

Whitechapel is already served by two tube lines (District and Hammersmith & City) and the Overground, and it will also become a Crossrail station. One Commercial Street, located in Whitechapel, offers high-end apartments with astonishing views, starting at £740,000.

These are just a few examples of developments near Crossrail stations that could offer investment opportunities. Crossrail is expected to have a positive impact on property prices and rental demand in these areas, making them worth considering for buy-to-let investments.

New developments with on-site amenities

London has a range of new developments with on-site amenities that are ideal for buy-to-let investors. Here are some options:

Greenwich Peninsula, SE10

This new property development offers modern amenities and short commuting times. It is located where the London cityscape meets the Thames estuary and is attracting interest from corporate professionals.

The West Works

The West Works comprises one, two, and three-bedroom apartments in Southall, 15 miles west of central London. Each apartment features a private balcony set around podium gardens and a communal courtyard.

One Clapham Junction, SW11

One Clapham Junction offers one, two, and three-bedroom apartments on the south bank of the Thames, between Wandsworth and Clapham Common. It is a modern development popular with young, affluent residents.

Copper Yard

Copper Yard is a collection of one, two, and three-bedroom apartments conveniently located next to Hackney Wick rail station. The development is unified by a pedestrian bridge that creates a walkway from the canal to the station.

New Avenue, Enfield

New Avenue is a development of one, two, and three-bedroom apartments and two and three-bedroom maisonettes in the London Borough of Enfield. The apartments are surrounded by a lush, green community centre.

City North, Finsbury Park

City North is a landmark development featuring two stunning towers of exclusive two, three, and four-bedroom apartments and penthouses. It offers sophisticated living just 15 minutes from the City of London.

Lanterns Court, E14

Lanterns Court offers over 600 sleek and stylish studios, one, two, and three-bedroom apartments.

Kensington Church Street, W8

This brand-new development offers contemporary apartments with bright, open-plan interiors, large double-glazed windows, wooden flooring, and comfort cooling.

Kensington High Street, W14

Over 300 new flats are coming to the corner of High Street Kensington and Warwick Road, providing a massive boost to the London lettings scene.

Aldgate Place, E1

Aldgate Place is a new development situated on the fringes of the City of London, within easy reach of cultural and financial centres. It offers near-zero commuting times, attracting corporate professionals.

Embassy Gardens, SW8

Embassy Gardens is a must-see for corporate professionals due to its startlingly original leisure facility, allowing residents to swim across to their neighbours while remaining ten storeys above street level.

Royal Wharf, E16

Royal Wharf is part of the ongoing development of Royal Dock in Silvertown, offering spectacular views of the Thames from its one, two, and three-bedroom apartments.

The Collective Old Oak, Willesden NW10

The Collective Old Oak is a build-to-rent development with 323 units, offering the convenience of having all necessary amenities and services provided on-site.

Corporate professional tenants

When considering where to invest in a London buy-to-let property to attract corporate professional tenants, there are several factors to take into account.

Firstly, corporate tenants tend to have certain expectations of the property they are renting. They will be looking for a well-maintained property in good condition, with modern and neutral décor. They may also expect additional services such as a dedicated property manager and 24/7 support. Families relocating from overseas will also be interested in local and international schools, shops, and amenities.

Secondly, location is key. Corporate tenants often want to be near transport links, such as tube or train stations, and within easy reach of food and utility shops. They may also prefer to be within a reasonable commute of central London, usually no more than 30 minutes away. Areas with good transport links tend to have higher prices and rents, even if they are further out than cheaper areas.

Thirdly, consider the rental yield, which is the annual income you can expect to earn from your property investment. A high rental yield in the UK is generally considered to be between 5% and 9%. You can calculate the rental yield by taking the annual rental income and dividing it by the cost of purchasing the property, then multiplying it by 100. For example, if you buy a property for £600,000 and rent it out at £450 per week, your annual rental income would be £23,400, giving you a rental yield of 3.9%.

With these factors in mind, here are four London areas to consider for a buy-to-let investment targeting corporate professional tenants:

• Hackney and Homerton (E9): This area offers solid rental yields of 5.4% and has seen a staggering 20% growth in average prices. Hackney and the surrounding areas are in high demand due to excellent transport links, green spaces like Victoria Park, a vibrant cultural scene, and good rental value. The mix of traditional terraced houses and modern apartments makes it an ideal place to invest.
• East Ham (E6): Just five miles southeast of E9, East Ham offers slightly cheaper properties but with equally high average yields of 5.4%. The area is on the rise, with plenty of redevelopment projects attracting renters looking for a balance between affordability and location.
• Thamesmead (SE28): SE28, covering Thamesmead and stretching to Woolwich, offers the strongest yield of any postcode in London, at 6.1%. It has excellent links to central London and is conveniently located for residents who want to escape the city and head to Kent on weekends, making it attractive to families.
• Plaistow and Upton Park (E13): Neighbouring E6, this area has seen sharp increases in property prices due to several regeneration projects. E13 generates one of the strongest rental yields in London, with an average of 5.7%. It is also conveniently located near Stratford and West Ham, which are up-and-coming areas with new businesses, restaurants, and residential developments.

These areas offer a mix of affordability, strong rental yields, and attractive locations, making them ideal spots to target corporate professional tenants.

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