New research claims it has found the best type of housing in London for property investors, as rental demand in the capital remains strong and interest rates are set to fall in 2025.

Drawing on the latest house price and private rental data from August 2024, property specialists at SBA Property Management have identified terraced houses as the highest-yielding type of housing for buy-to-let returns in the capital city.

With average property prices of £579,743 and monthly rental costs of £2,594, terraced houses in London offer buy-to-let investors yields of 5.37% – well above the average for all property types at 4.81%.

The second most lucrative property type to invest in, according to the research, is flats which offer an above-average rental yield of 5.08%. The average price of a flat in London is £443,073, with monthly rent payments of £1,876.

Semi-detached houses were found to also present a good opportunity for investors, with average house prices of £686,952 and monthly rents of £2,695, yielding returns of 4.71%.

Detached houses offer the lowest rental yield for buy-to-let investors of 3.11%, with average house prices surpassing the million mark at £1,036,179.

When comparing London with the rest of the country, rental yields are unsurprisingly lower in London due to high property prices, but the pattern of how well different property types perform in terms of rental yield remains the same. Across England, terraced housing was the highest-yielding property type at 5.80%, closely followed by flats at 5.58%.

Research by SBA Property Management published in September 2024 found that Tower Hamlets is the best London borough for buy-to-let property investment, with figures showing strong rental yields of 5.9%. Southwark, Newham, Barking & Dagenham and Greenwich followed closely behind.