According to recent research carried out by property agents Knight Frank, average gross yields in prime central London have been rising steadily over the course of 2018, as property prices have declined.
The highest yield recorded was 3.35% in December, the highest recorded by Knight Frank since March 2015, which compares to the yield on 10-year UK government bonds of less than 1.3%. Lower property values are also resulting in higher yields in the prime areas of outer London.
With recorded lettings activity across prime London markets remaining relatively resilient, despite the uncertainty of Brexit, the number of new tenancies agreed in November was up 12.3% on the same month last year, while the number of new prospective tenants was 2% higher.
Falling supply has also continued to put upwards pressure on rental values, as landlords have been attempting to sell following recent tax changes. And despite a more recent reversal of this trend, as many owners failed to achieve their asking price, there were 12% fewer new listings in the year to November, compared to the same period last year.