Tower Hamlets has been identified as the London borough that currently has the highest-yielding borough for rental returns.

Analysts at SBA Property Management have delved into the top five areas of London for buy-to-let for rental yields.

With average property values of £456,375 and monthly rental costs of £2,244, the inner London borough of Tower Hamlets offers buy-to-let investors yields of 5.9% — significantly higher than the London average at 4.81%.

Another area for investors to target is Southwark, which has average house prices of £476,177 and private rents of £2,219, yielding returns of 5.59%.

Other opportunity areas identified by are Newham, Barking & Dagenham and Greenwich, offering average rental yields of 5.23%, 5.06% and 4.96% respectively.

Habib Mogul, director at SBA Property Management, said: “After several years of uncertainty, London’s property market is again shaping up to be one of the UK’s most attractive investment opportunities. Falling mortgage costs and stable property prices combined with high demand for rental accommodation means buy-to-let property in particular offers great potential for returns.

“Historically, large deposits and borrowing costs have been a barrier for buy-to-let landlords looking to invest in the capital. However, our research shows that many of the highest-yielding areas are those with the lowest property prices, reducing the initial investment needed to secure a piece of London’s lucrative property market.”

Tim Darwall-Smith, director at SBA Property Management, added that the easing of mortgage costs brings more relief to buy-to-let landlords, freeing up resources to make value-boosting renovations and deliver a better tenant experience.

He added: “Ultimately, the investors with well-managed properties will be best placed to benefit from London’s highly profitable rental market.”