Rental yields in prime central London have reached their highest level since 2009, as rising rents and softer property values improve returns for landlords. Savills figures show that prime rents continued to increase during the third quarter of 2026, with prime central London rents rising 1.1% between July and September, marking the strongest quarterly increase in two years.
Despite improving yields, regulatory uncertainty and tax pressures are restricting rental supply, especially for properties with annual rents below £100,000, which fall under the Renters’ Rights Act. Savills reports that almost half of its agents identified this legislation as a key concern for landlords, alongside increased taxation and higher mortgage costs.
Reduced availability in this segment has intensified competition among tenants, supporting further rental growth. Jessica Tomlinson, a research analyst at Savills, noted that landlord caution continues to constrain supply, particularly in lower rental value bands, which in turn supports rental growth, though affordability limits the pace of increases.
Gross yields on prime London flats are generally above 4%, with one-bedroom apartments delivering the highest average return at 5.8%. While stronger yields may incentivise some landlords to retain properties, higher financing, maintenance, and compliance costs can affect net returns.
Outside London, prime regional rental growth was more subdued in the third quarter, with average rents increasing 0.3% over three months and 1.5% year-on-year. Savills warns that tenants' ability to absorb further rent increases is becoming increasingly limited, leading landlords to be more pragmatic on pricing.