Terraced houses offer the best London BTL investment

London’s terraced houses are the most lucrative property type for buy to let investors, research reveals.

With average property prices of £579,743 and rent of £2,594, terraced houses in the capital offer BTL investors yields of 5.37% – that’s higher than the average of 4.81%.

The second most lucrative BTL property type are flats which cost, on average, £443,073 with rent of £1,876 to deliver a yield of 5.08%, SBA Property Management says.

Semi-detached houses costing an average of £686,952 and tenants paying £2,695, yield returns of 4.71%.

Detached houses offer the lowest yield of 3.11%.

‘Look at the London property market’

The firm’s managing director, Tim Darwall-Smith, said: “As mortgage costs fall and demand for rented accommodation continues to increase, now is the perfect time for investors to look at the London property market.

“Our analysis of the latest data shows that terraced housing is the best investment opportunity in London, yielding high rental return rates of 5.37%.”

He added: “Investors must pay attention to which property types and locations will make them the best returns – as interest rates continue to decrease, new opportunities will present themselves.”

Growth in the London rental market

The research also highlights the potential for future growth in the London rental market, with experts predicting a moderate annual increase in rents of 3-5% by 2025.

This, coupled with declining interest rates and rising tenant demand, is set to create favourable conditions for property investors.

When comparing London to the rest of England, the trend remains consistent: terraced houses emerged as the top-performing property type, with a rental yield of 5.80%, followed closely by flats at 5.58%.

Most reliable investment opportunity

The research shows that terraced houses and flats have proven to be the most reliable investment opportunity over the last five years.

They delivered average rental yields from August 2019-July 2024 of 4.88% and 4.47% respectively.

Semi-detached properties had an average return of 4.32% – just above the five-year average for all properties at 4.3%.

Across England, terraced housing was the highest-yielding property type at 5.80%, closely followed by flats at 5.58%.

The firm’s previous research identified Tower Hamlets as the best London borough for buy to let investments, offering rental yields of 5.9%.

Southwark, Newham, Barking & Dagenham and Greenwich also presented promising opportunities for investors.

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