By the end of August 2014, the sales market had slowed to a virtual halt and prices were starting to fall. As a result, many buyers decided to hold off and wait, or rent. Consequently pushing the rental market back to 2013 levels.

Flat lining sales market in 2015

Since the start of the 2015, the sales market has levelled off in most central areas with virtually no growth and in some areas a small drop.

Despite asking prices remaining high, we have negotiated several acquisitions since the start of the year that were 7 to 10% from the asking price.

As an example, we just negotiated 9% off a two bedroom flat in Earls Court for a client that was on the market for £725,000. With a rental return of £500.00 per week, this produced a gross yield of 3.88%.

Had this apartment come available in early 2014 the asking price would have been £750,000 and would have likely achieved that level. With the rental market at that time 5 to 10% lower than today’s rental prices, the yield would have barely breached the 3% mark.

Although this is not the case in every area, the opportunity to find stronger rental returns in zone 1 is far better than throughout most of 2014.

With yields creeping back towards 2012/13 levels, the appeal for rental investors is getting stronger.

Changing attitudes towards renting

With the population of London set to grow by a million residents over the coming seven years, demand for rental property is likely to remain strong.

Central London currently has an unprecedented number of new developments under construction, which some have suggested may unbalance the market. Whilst this looks impossible in the long term there is likely to be more on offer in the coming three to four years at the middle to top end of the market, as these new developments come to market.

Another factor for investors to consider is the changing attitudes to renting. Tenants have more choice than even just a few years ago and expect far more from a rental property.

For those priced out of areas they cannot afford to buy in but can afford to rent in now look at renting as a more long-term option than several years ago. This is evident by the increasing number of tenants signing two to three year contracts becoming more common.

Long term the prospects for London rental investment are still excellent but we expect to see many more properties coming to the rental market in the coming years, meaning the need to make a well-informed purchase has never been more relevant.

To find out where to invest in the London property market, download our free Hotspots Report here.