London Property Report 2023

• Average Property Price – £534,265
• Average Monthly Rent – £2145
• Average Gross Rental Yield – 4.82%

Famously, property in London is substantially more expensive than the UK average. According to the UK House Price Index, the overall UK figure is currently £289,824, meaning London is over £200,000 pricier on average – an eye-watering sum for many investors.

When it comes to rent, the capital is also much more expensive when compared to the nationwide average, which stands at £1261 according to the HomeLet Rental Index, with an average gross rental yield of 4.82%.

Read our UK house price predictions for the next 5 years for a full breakdown.

This year, the UK housing market has been sluggish, and London has been most affected, displaying a sharp deceleration in price growth.

Uncertainty and a slump in housing transactions have hit the value of property hard in London. With fewer buyers, houses are being sold at lower price points. The average price of London property still sits much higher than the overall UK average, but the nationwide trend towards stagnation in the housing market is worse in London compared to other regions.

According to the UK House Price Index, London’s average house price for July 2023 is £534,265. Compared to July last year, this is down -0.8%. It is up slightly on the previous month, growing 1.1%, but when we look at 2023 as a whole compared to last year, the slowdown in growth is stark.

As mentioned, London rents are significantly higher than average.

This, coupled with the steep cost of living in the capital, has led to reports of renters moving out of the city in search of a more affordable lifestyle. Some have turned their sights to cheaper commuter towns, while others have decided on cities in the north of England where rent and living costs are much lower.

But regardless of the climbing rental costs, demand for rental properties in London continues to far outstrip supply. While some renters have been priced out of the capital, London’s appeal hasn’t dwindled in the eyes of many others. The city is densely packed with world-class work and education opportunities that cannot be found elsewhere, attracting renters from other parts of the country and students and immigrants.

The private rental sector also provides accommodation for a higher percentage of Londoners when compared with the UK average. Nationwide, one-fifth of households reside in private rental properties, but this proportion is 30% in London, putting more pressure on the industry.

Despite the current stunted activity in the London property market, many experts are optimistic for the future. There will likely be a return to growth in the next few years, but it is doubtful the market will flourish to the extent of pre-2016 levels.

Property experts Savills predict that London’s mainstream capital value will see a return to modest growth from 2025 onwards.

Source: Savills Research, January 2023

Currently, Barking and Dagenham is the cheapest place in London for property, and according to Zoopla, it ranks highest in the area when it comes to gross average rental yield. They calculate that this figure is 5.81%.

This makes Barking and Dagenham a top choice when it comes to property investment in London.

Newham comes in second for rental yields with 5.56% and has also been identified as a comparatively affordable part of the city for buying property. According to an article from the BBC, Newham displayed the most significant annual rental cost increase in the country, a hefty 20.9%. This suggests high demand for this area, and tenants are willing to shell out extra pounds to rent here, which is good news for buy-to-let investors.

Bexley has the third-highest average rental yield for London, sitting at 5.38%. While previously considered a more affordable area of London, the value of property in Bexley has risen rapidly over the past three years as high-earners are priced out of the central London zones. For this reason, it is considered an area with good potential for capital growth.

Beyond 2023, these areas are also set to gain a boost from regeneration, which is likely to positively affect rental demand, rental income, and capital growth in the future.

Discover the best place to invest in property with our updated market overview.