London Property Prices Are Softening — But Rental Yields Are Rising

Over the past two years, London’s residential property market has entered a new phase. While headline prices have softened in certain areas, rental demand has surged — creating a very different opportunity landscape for investors.

According to recent market data, average asking prices across parts of London have adjusted downward from their post-pandemic peaks. Higher interest rates, affordability pressures, and cautious buyer sentiment have contributed to this recalibration. However, this does not signal weakness in the market — rather, it reflects a shift in how value is created.

At the same time, rental demand has reached record levels. A growing population, international students returning to the city, young professionals delaying purchases, and limited new housing supply have all pushed rents upward. In many London boroughs, rental growth has significantly outpaced inflation, resulting in stronger gross and net yields for buy-to-let investors.

For investors, this environment presents a clear advantage. Lower acquisition prices reduce entry costs, while higher rents improve cash flow. In practical terms, this means that properties acquired today may deliver better income performance than those purchased at peak pricing — even before considering long-term capital appreciation.

London has always been a long-term market. Periods of price adjustment are not new, and historically they have often preceded the next growth cycle. What differentiates the current moment is that income generation has become the primary driver of returns, rather than short-term price appreciation.

For investors focused on fundamentals — location, tenant demand, and operational efficiency — London remains one of the most resilient residential markets globally. The opportunity today lies in buying well, structuring correctly, and operating professionally.