Prime London landlord yields highest since 2009

Landlords in prime central London are seeing yields at their highest since 2009, as rising rents and lower property values improve returns.

Savills says yields on prime London flats are broadly above 4%, reaching an average of 5.8% for one-bedroom properties.

However, the Renters’ Rights Act remains landlords’ biggest concern, with almost half of the firm’s agents identifying it as a key issue.

Increased taxation on property investment income ranked second, followed by higher mortgage costs.

Landlord caution restricts supply

Jessica Tomlinson, a research analyst at Savills, said: “There are signs that landlord caution is continuing to constrain rental supply, particularly in the lower rental value bands where pressure is most acute.

“That, in turn, is helping to support rental growth, although affordability constraints continue to limit the pace of increases.”

She added: “Affordability constraints are increasingly acting as a ceiling on rental growth, with many tenants reaching the limits of what is realistic and sustainable within household budgets.

“As a result, landlords are becoming more pragmatic on pricing, recognising that securing a suitable tenant is often preferable to facing a costly void period.”

Prime London rent rises

Prime central London rents rose by 1.1% in the third quarter of 2026, their strongest quarterly increase in two years.

Annual growth reached 1.9%, while outer prime London recorded increases of 0.9% over the quarter and 2.9% over the year.

Savills says growth has been strongest among properties with annual rents below the £100,000 threshold it identifies for the Renters’ Rights Act.

In these markets, where landlords are most exposed to regulatory change, fewer available homes have intensified competition among tenants.

Regional tenants face limits

Across prime regional markets, quarterly rent growth slowed to 0.3%, leaving rents 1.5% higher than a year earlier.

London’s outer commuter belt recorded the strongest annual growth, with rents now 33% above their level in the first quarter of 2020.

Regional cities including Birmingham, Edinburgh and Manchester led the quarterly increases, driven by smaller properties, where demand remained most resilient.

Ms Tomlinson said legislative changes had reduced landlords’ flexibility, although stronger yields and short-term letting becoming a less viable alternative were providing an incentive to keep letting.