The average rental yield across London now stands at 5%, up from 4.9% a year ago, says a high profile lettings agency.

Benham and Reeves says this demonstrates the continued resilience of the capital’s rental market despite wider economic uncertainty.

Tower Hamlets currently ranks as the most profitable borough for buy-to-let investors, with an estimated gross rental yield of 6.3%. This marks a substantial increase from 5.5% a year ago. 

The borough’s strong performance has been driven by a combination of falling property values and continued rental market strength.

Newham sits in second place, with landlords achieving an estimated yield of 6%, up from 5.2% a year ago.

At the other end of the spectrum, Kensington & Chelsea remains the borough with the lowest rental yield at 3.4%, despite a modest annual improvement. 

When it comes to annual yield growth, Tower Hamlets and Newham have led the way, with both boroughs recording an increase of +0.8% over the last year.

Only two London boroughs saw a reduction in yields over the past year. They are Brent and Waltham Forest, both of which saw yields shrink by -0.1%.

Marc von Grundherr, director of Benham and Reeves, comments: “London’s rental market continues to provide attractive opportunities for buy-to-let investors, particularly in boroughs where house price growth has softened while tenant demand remains robust.

“Tower Hamlets and Newham stand out not only because they currently offer the highest rental yields in the capital, but because they have also seen the most significant improvement over the last year. This combination of strong income returns and positive yield growth is likely to attract increasing investor interest.

“At the same time, traditionally prime markets such as Kensington and Chelsea and Richmond upon Thames continue to generate lower yields due to their higher property values, but these areas always remain attractive for investors seeking long-term capital appreciation rather than immediate rental income.”