Prime London 'unattractive to Build To Let investors'

Competition from big-money overseas private landlords and low yields are making prime central London unattractive to institutional investors who want returns from Build To Let schemes.

That is the view of investment analytics firm MSCI. Quoting the IPD UK Annual Residential Property Index, it says that the strongest districts for overall returns - combining capital appreciation and rental income - are to be found outside of prime Central London, with returns in inner London and outer London the highest in the UK.

The Index results show that the net yield in central London has fallen to 1.8 per cent while across the UK the net income yield has fallen to 2.4 per cent.

If you invested in London residential at some point during the last 10 years, the chances are that you're laughing all the way to the bank. However, if you are looking to put money into the sector now, our data shows that investors seeking income will find themselves' priced out by foreign investors and owner occupiers when trying to buy existing stock in London claims Mark Weedon of investment advisory service MSCI.

He says there is now a de facto exclusion loan on central London for most instituitional investors, at a time when concern over access to housing has seldom been higher.

Central London (zone 1) returns slipped to 9.8 per cent last year from 14.7 per cent in 2013. Outside of the capital, south west England and the Midlands performed the strongest, returning 9.7 per cent each.

Northern England and Scotland also saw an improvement in returns to 3.5 per cent, the first time returns have entered positive territory in those areas since 2007. This area also experienced a rise in rental growth from 1.5 per cent to 2.4 per cent - the only region outside of London to see this.