London Buy-to-Let Is Back — But the Numbers Demand Scrutiny

London landlords are returning to the market in numbers not seen since the stamp duty reforms of early 2025, but the yield figures underpinning that confidence are doing a lot of heavy lifting. Across Zone 4 to 6 corridors, gross rental yields are running at between 5.2% and 6.8% — figures that sound compelling until you strip out void periods, maintenance costs and the higher-rate mortgage products most portfolio landlords still carry.

The timing matters. The Bank of England's base rate sits at 4.25% as of this week, meaning the margin between borrowing costs and net rental income — the so-called cash-on-cash return — is thin enough in many postcodes to make a single bad tenant costly. Yet transaction data from the Land Registry shows buy-to-let purchases in Greater London rose 18% in the first quarter of 2026 compared with the same period last year. Investors are moving. The question is whether the arithmetic holds up.

Where the Yields Actually Are

The strongest numbers are clustering along the Elizabeth line's outer reaches. Barking, where average asking rents for a two-bedroom flat now sit around £1,650 a month against purchase prices of roughly £320,000, is generating gross yields close to 6.2%. That is a meaningful premium over the 3.8% a buyer in Bethnal Green can realistically expect on a comparable flat that costs nearer £550,000. Manor Road in Barking and the streets immediately north of Ilford station have seen the sharpest investor interest since the line's full operational timetable bedded in.

Outer south London is also attracting attention. In Croydon's Centrale catchment area and along the tram corridor toward Wimbledon, landlords are picking up one-bedroom flats at sub-£280,000 price points and achieving rents of £1,400 to £1,500 a month — yields above 6% before costs. The Croydon council's regeneration programme around Westfield's planned development site, though repeatedly delayed, continues to anchor long-term capital growth expectations in the area.

Contrast that with the prime rental market. In Marylebone and parts of Chelsea, gross yields rarely breach 3.5%. Landlords there are playing a different game — betting on capital preservation and the marginal currency advantages that attract international tenants — but as an income investment, the numbers are difficult to justify against current finance costs.

Net Yields Tell a Different Story

Gross figures are where the marketing material stops. Net yield — after accounting for letting agent fees typically running at 12-15% of rent, insurance, licensing costs under London's various selective licensing schemes, and an assumed 4-week void per year — shaves between 1.5 and 2 percentage points off gross in most cases. A 6% gross yield in Barking becomes something closer to 4.2% net. That remains above the break-even point on a 75% loan-to-value mortgage at current rates, but only just, and only if nothing goes wrong.

Selective licensing is a specific pressure point. As of June 2026, 21 London boroughs operate some form of private rented sector licensing scheme, with Newham and Southwark among those running borough-wide programmes. Annual licence fees between £500 and £900 per property are not trivial on a single-unit investment, and enforcement activity has increased materially since the Renters' Rights Act came into full effect in March 2026.

The stamp duty surcharge for additional dwellings, reformed in the Autumn 2024 budget, now stands at 5% on purchases above £250,000. On a £320,000 Barking flat, that is £16,000 in tax before legal fees and surveys. Investors recouping that through rental income alone need roughly two years of clean tenancy before they are in profit on acquisition costs.

For prospective landlords doing the calculation now, the most durable positions appear to be in Zone 4 and 5 properties bought below £350,000 with meaningful equity stakes — at least 35% down — that reduce mortgage payment exposure. The yield story is real in those specific conditions. Everywhere else in London, the spreadsheet needs to be stress-tested harder than the current enthusiasm in the market might suggest.