Institutional investors are being priced out of the London residential market as net yields fall to their lowest levels on record.
According to the latest IPD UK annual residential property index, net yields in central London fell to 1.8% in 2014. Across the UK, the net income yield dropped to 2.4%.
Mark Weedon, vice-president and head of alternatives at IPD owner MSCI, said: “If you invested in London residential at some point 10 years ago, the chances are that you are laughing all the way to the bank. However, if you are looking to put money into the sector now, investors seeking income will find themselves priced out.”
The total return for the UK was 13.5%, 24.4% for inner London and 21.1% for outer London. Central London returns slipped from 14.7% in 2013 to 9.8% last year.
