Prime central London yields hit highest level since 2009, with one-beds averaging 5.8%
Prime rents continued to rise in Q3 2026 as cautious landlords kept a lid on rental supply, pushing yields higher in a shift that could shape buy-to-let (BTL) conversations between brokers and their clients, according to property adviser Savills.
Prime central London (PCL) rents rose 1.1% on the quarter and are 1.9% higher year-on-year, according to Savills’ prime lettings indices. PCL recorded its strongest quarterly rental growth in two years, which Savills said signalled a return to momentum after a more subdued period. Outer prime London rents grew 0.9% on the quarter and 2.9% annually, while all prime regional markets rose 0.3% and 1.5%.
Stronger rents combined with softer capital values have improved returns for many landlords. Yields on prime London flats are broadly above 4% across the board, Savills said, peaking at an average of 5.8% for one-bedroom apartments in the capital. Across PCL as a whole, yields are at their strongest level since 2009.
Landlord caution concentrated in lower rental bands
The Renters’ Rights Act (RRA) remains landlords’ biggest concern, with almost half of Savills agents naming it a key issue. Increased taxation on property investment income ranked second, followed by higher mortgage costs.
The impact has varied by market, Savills said. Rental growth was strongest among properties with annual rents below the £100,000 threshold defined by the RRA, where landlords are most exposed to regulatory change. A reduction in available stock there has intensified competition among tenants.
“There are signs that landlord caution is continuing to constrain rental supply, particularly in the lower rental value bands where pressure is most acute,” said Jessica Tomlinson, research analyst at Savills. “That, in turn, is helping to support rental growth, although affordability constraints continue to limit the pace of increases.”
She added: “It remains too early to judge the full legacy of the Renters’ Rights Act. For now, we know that it has made some landlords more cautious, and some have reassessed their options. The future direction of prime rents will depend on how many decide to leave the sector or, instead, take advantage of current buying opportunities.”
Across prime regional markets, growth slowed to 0.3% on the quarter. Annually, rents have risen most strongly in London’s outer commuter belt, where they are now 33% higher than in Q1 2020. Birmingham, Edinburgh and Manchester were the strongest quarterly performers, driven by smaller properties where demand remains most resilient.
“Affordability constraints are increasingly acting as a ceiling on rental growth, with many tenants reaching the limits of what is realistic and sustainable within household budgets,” Tomlinson said. “As a result, landlords are becoming more pragmatic on pricing, recognising that securing a suitable tenant is often preferable to facing a costly void period.
“But with short-term letting becoming a less viable alternative for many, and yields strengthening, there is a growing incentive to remain in the rental market rather than wait for more favourable sales conditions.”
Rules and rates frame the outlook
The findings follow the first phase of the RRA taking effect on 1 May 2026, which ended no-fault evictions and assured shorthold tenancies, according to NatWest Intermediary. A second phase due later this year is set to bring in the private rental sector database and a landlord ombudsman.
Official data point the same way on rents. Average UK private rents rose 3.8% to £1,400 in the 12 months to August, the Office for National Statistics (ONS) reported, with London the main driver. The ONS also found UK house prices up 1.4% to £273,000 in the year to July, while London prices fell 3.3%. Savills’ figures cover prime markets only, so they are not directly comparable.
On funding costs, the Bank of England held Bank Rate at 3.75% on 17 September, voting 6-3, with three members preferring a rise to 4%. Governor Andrew Bailey said a rate increase becomes more likely the longer energy-price volatility persists. Inflation stands at 3.1%, and the next decision is due on 5 November.
For brokers, the picture offers a reference point for clients deciding whether to remortgage, hold or sell. Firmer yields could support rental cover calculations, while the rate outlook and the RRA’s rules will bear on how landlords plan.
