Landlords cash in as city buy-to-lets bounce back

City centre landlords have cashed in as surging tenant demand meant yields have jumped this year.

So far in 2021, the average investor purchasing a buy-to-let in a city achieved a gross yield of 5.3pc, according to Hamptons estate agents. This was a boost of 0.6 percentage points from 2020, when returns slumped in the wake of the pandemic.

By contrast, rental yields of properties in the countryside fell 0.2 points due to rapid house price growth in the past year.

In London, a recovery in the rental market has combined with depressed property prices to push yields to their highest levels in five years, at 4.6pc. In some cases, agents reported landlords earning yields nearly double the lockdown low.

Matt Staton, of Berkshire Hathaway HomeServices, an estate agent, said: “We had a £375,000 studio near Hyde

Park that at the peak of the downturn was getting £1,000 per month, so about a 3pc yield. A very similar property now rents out for 4.8pc.”

During the height of pandemic restrictions, central London rents fell by about 20pc. as international relocators disappeared. At the same time, the collapse of tourism brought a flood of Airbnb-style short-term lets on to the long- term market and tenants were looking for larger homes in the suburbs.

These price drops drew in new tenants who had previously been priced out of more central markets. Then the easing of restrictions further boosted the appeal of inner city living.

“We have had a lot of people saying they lived out in the countryside for lockdown, but the pubs all shut at 10pm and now they have fear of missing out. Even working in the office three days a week, the commute tips people over the edge,” said Mr Staton.

Students have started signing contracts ahead of the next academic year, when classes will be in person.

Spencer Fortag, of Landmark Estates, an east London estate agent, said: “There has been a massive bounceback and it’s been really quick.” Demand has jumped particularly in the past two weeks, he added. Some flats in Aldgate and Shoreditch have already recovered to pre- Covid rents – having dropped by 30pc during lockdown. He noted a three-bedroom property on the Isle of Dogs that let within two days following five offers and was secured at £100 per month more than its £2,500 asking price.

Outdoor space, which previously added no value, can now bring a 20pc premium, said Mr Staton.

In cities outside the capital, Hamptons data showed yields recovered to their 2019 level of 6.2pc. Tim Coen, of the North Property Group, said investors had piled in to regional city markets. “We have done 50 sales a month to landlords since May. That is twice the normal level.”

Matt Coulson of Heron Financial, a mortgage broker, said buy-to-let landlords had returned to the market in a “big way” this year.

He added: “They are being tempted back by a lack of competition from other buyers, especially for flats. Landlords would usually be competing with