Where are the Best Buy-to-Let Areas in London?
CategoriesInvestor Advice

If you’re looking for a new investment opportunity, then buying a buy-to-let property in London may be the way to go. But with so many areas of the city to choose from, it can be difficult to know where is the best place to make your investment.

But first, there’s a question of whether London is the right location at all. The property market in the capital has grown exponentially over the past decade. According to the UK House Price Index, the average house price in London has increased from £294,360 to £517,530 over the last 10 years (January 2012 to January 2022). Our internal data shows most investors have a budget of around £50,000 to use as a deposit, which would put London out of touch given most buy-to-let mortgages require a 70-80% loan-to-value (LTV) ratio.

And although rental prices have grown in that time too, the high purchase price of London property means it can be difficult to achieve a solid, profitable rental yield, which is key for any buy-to-let investor.

Plus, Savill’s regional forecasts predict a slower rate of house price growth in London over the next 5 years than anywhere else in the country (excluding prime, luxury-level properties).

None of this means London is a bad choice. Even a small percentage increase in house prices in London can result in a substantial amount of raw monetary value (other areas across the country simply have more scope for bigger percentage increases given their lower starting position). And, Savill’s report (above) estimates London will see the biggest growth in rental prices than anywhere else in England as graduates and young professionals continue to flock to the capital.

So, with rental demand set to soar, this leads us back nicely to the question of where are the best areas for a buy-to-let 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.

So, where are the best buy-to-let areas in London in 2022?

There’s often lots of hype about London, with certain areas touted as hotspots or ‘the next big thing’. In this report, we want to remove the hype and use data to make an objective analysis.

So, we’ve scored each postcode district in London on three factors:

  • Rental yield – The annual rental income as a percentage of the property’s value. Yield is key to profitability, as the higher a yield, the more likely it is that the monthly rental income covers all costs with room to spare. As such, any postcodes with an average yield of less than 4% have been excluded.
  • Five-year price growth – The growth in average asking prices over the past five years. Whilst past performance is no guarantee of future growth (especially during the anticipated market slowdown), it is nonetheless a highly useful indicator.
  • Average asking price – The average asking price for properties in the area. Cheaper properties are more affordable for a wider pool of investors, plus they offer room for substantial price growth long-term.

Each factor has been weighted to generate a final score:

  • Rental yield – 60%
  • Five-year price growth – 30%
  • Average asking price – 10%

Now, without further ado, here are the top 20 buy-to-let areas in London:

Postcode Area Avg asking price Avg rental price Avg yield Five-year price growth Weighted score
SE13 Lewisham, Hither Green £441,314 £1,515 4.10% 27.00% 21.16
E15 Stratford, West Ham £446,520 £1,784 4.80% 24.00% 20.58
E6 East Ham £423,573 £1,602 4.50% 22.00% 20.40
N15 Seven Sisters £476,302 £1,614 4.10% 27.00% 20.16
SE11 Lambeth £569,503 £2,123 4.50% 34.00% 19.80
N9 Lower Edmonton £386,635 £1,415 4.40% 18.00% 19.74
N18 Upper Edmonton £407,540 £1,524 4.50% 18.00% 19.60
SE25 South Norwood £372,112 £1,254 4.00% 14.00% 18.40
SE28 Thamesmead £314,349 £1,368 5.20% 11.00% 18.32
E13 Plaistow £411,940 £1,678 4.90% 13.00% 18.14
SE14 New Cross, New Cross Gate £463,019 £1,704 4.40% 18.00% 18.04
SE7 Charlton £431,180 £1,710 4.80% 13.00% 17.68
NW9 Kinsbury, Colindale £465,284 £1,621 4.20% 17.00% 17.42
E7 Forest Gate, Upton Park £500,974 £1,729 4.10% 19.00% 17.16
SE2 Abbey Wood £417,632 £1,529 4.40% 11.00% 17.14
SE18 Woolwich, Plumstead £411,562 £1,547 4.50% 8.00% 16.50
SE12 Lee, Grove Park £464,670 £1,573 4.10% 13.00% 16.26
SE9 Eltham, Mottingham £481,640 £1,586 4.00% 14.00% 16.10
SE4 Brockley, Crofton Park, Honor Oak Park £535,957 £1,774 4.00% 18.00% 16.10
N19 Archway, Tufnell Park £553,734 £2,037 4.40% 20.00% 16.04
E9 Hackney, Homerton £543,605 £1,952 4.30% 18.00% 15.98
SW16 Streatham, Norbury £497,579 £1,686 4.10% 12.00% 15.26
SE20 Penge, Anerley £397,520 £1,355 4.10% 3.00% 14.96
E14 Poplar, Millwall, Isle of Dogs, Docklands £571,457 £2,158 4.50% 18.00% 14.80
SE15 Peckham, Nunhead £547,819 £1,949 4.30% 14.00% 14.38

Our data shows that the best buy-to-let area in London is SE13, covering Lewisham and Hither Green. Interestingly, this result is part of a wider pattern, whereby the table is dominated by areas in the East and South East (and a healthy sprinkling of North London postcodes).

How come?

Compared to other parts of London, many areas in the table above are historically poorer neighbourhoods. They’re in a transition process as extensive regeneration projects revive and boost the local communities.

But for now, they’re in the early stages. And that means that whilst average prices have increased substantially over the past five years, they’re still far more affordable than other areas in London. Plus, rents are more proportionate to these prices, resulting in solid yields.

Now, let’s take a closer look at the five top performers.

SE13 – Lewisham and Hither Green

To get the most return on your buy-to-let investment in London, our data shows SE13, covering Lewisham and Hither Green, is the best choice. With solid rental yields (for London) of 4.1% and a staggering growth in average prices of 27%, it represents an excellent choice for investors.

Furthermore, investors will not be short of tenants. Lewisham and the surrounding areas are in high demand as the entire borough makes rapid progress. Excellent transport links, lots of outdoor areas, a lively cultural scene, and good rental value are major pulls.

All in all, with its mix of traditional terraced houses and modern apartments, Lewisham is an ideal place to invest in a buy-to-let.

SE13 by the numbers:

  • Average asking price – £441,314
  • Average rental price – £1,515
  • Average annual income from rent – £18,144
  • Average rental yield – 4.1%
  • Five year property price growth – 27%

E15 – Stratford and West Ham

Stratford and West Ham are two of the most up-and-coming areas in London. These once-neglected boroughs are thriving with new businesses, restaurants, and residential developments thanks to several regeneration projects. As a result, property prices in both Stratford and West Ham have sharply increased in recent years. This presents an excellent opportunity for savvy investors to purchase property in these areas while prices are still relatively affordable.

With the arrival of Crossrail’s Elizabeth line, travel times to central London from Stratford station have been reduced even further, making the area more attractive to buyers and tenants.

Therefore, it’s no surprise that E15 generates one of the strongest rental yields in all of London, with an average of 4.8%.

E15 by the numbers:

  • Average asking price – £446,520
  • Average rental price – £1,784
  • Average annual income from rent – £21,408
  • Average rental yield – 4.8%
  • Five year property price growth – 24%

E6 – East Ham

Three miles to the southeast of E15 is E6, covering East Ham. Properties are slightly cheaper, but average yields remain high at 4.5%.

East Ham is on the rise, with plenty of redevelopment projects either finished, in progress or in the pipeline. And that’s led to a proliferation of interest from renters, especially those looking for a balance between affordability and location.

E6 by the numbers:

  • Average asking price – £423,573
  • Average rental price – £1,602
  • Average annual income from rent – £19,224
  • Average rental yield – 4.5%
  • Five year property price growth – 22%

N15 – Seven Sisters

N15, covering Seven Sisters, is the first postcode from north of the Thames, making it the best buy-to-let area in North London.

Part of Tottenham, N15 and Seven Sisters have serious potential. Haringey Council intends to redevelop the town centre with mixed-use infrastructure, particularly at Wards Corner and Apex House.

But it’s already extremely popular with young professionals thanks to easy links with central London, fantastic food and events (including a thriving Latin market), and more affordable rental prices.

N15 by the numbers:

  • Average asking price – £476,302
  • Average rental price – £1,614
  • Average annual income from rent – £19,368
  • Average rental yield – 4.1%
  • Five year property price growth – 27%

SE11 – Lambeth

There are many reasons to invest in property in SE11, covering Lambeth. The borough is very close to central London, making it a convenient place to live or work. It is also well-connected, with excellent transport links to the rest of the city, including popular spots like Brixton and Clapham.

Additionally, Lambeth has a lot to offer in terms of culture and entertainment. There are numerous museums, art galleries, theatres, and a vibrant nightlife scene.

But perhaps more than anything, it’s the incredible growth the area has seen over the past years. The 34% increase in average asking prices over the past five years is the largest of any location in our top 20.

Naturally, this makes it a more expensive area, but rental prices have increased alongside the values, which means excellent yields of 4.5% can be achieved.

SE11 by the numbers:

  • Average asking price – £569,503,573
  • Average rental price – £2,123
  • Average annual income from rent – £25,476
  • Average rental yield – 4.5%
  • Five year property price growth – 34%

Summary

If you know where to look, there is value to be found all over London for a buy-to-let investor. And by using data to remove assumptions and conduct an objective analysis, you can identify some of the highest potential boroughs and towns across the entire region – helping you steal a march on the market and generate even better returns long-term.

Please get in touch if you’d like to invest in a buy-to-let in London. We’re a property investment company with an office in the Strand. And with decades of combined experience amongst our team, we know how to help you find and acquire a property that suits your budget and goals.

Get in touch to learn more and speak to our team today.

About the data

The data in this article comes from PropertyData. It accurately represents the London property market as of July 2022. We’ll update this report next year, in 2023, with fresh data.

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