New-build investment in London is about the numbers: yield, capital growth, void risk and total cost of ownership. Here is how to analyse a purchase like an investor.
Rental yield
Gross yield = annual rent ÷ purchase price. Net yield deducts costs (service charge, ground rent, management, voids, maintenance). In London, gross yields commonly sit around 3–5%; outer zones often yield more than prime central.
Capital growth vs cash flow
Prime areas tend to favour long-term capital growth with thinner yields; regeneration and outer-zone areas can offer stronger yields and growth potential as infrastructure (e.g. the Elizabeth line) matures.
Costs that eat returns
- •Service charge and ground rent (leasehold)
- •Letting and management fees
- •Voids between tenancies
- •Stamp duty surcharge on additional properties
- •Income tax on rental profit
Due diligence
Check comparable rents (not just the developer’s estimate), the service charge history, the lease length, and the local rental demand. Model a realistic net yield before committing.
Key takeaways
- ✓Always calculate NET yield after all costs, not gross.
- ✓Additional-property stamp duty surcharge materially affects returns.
- ✓Outer/regeneration zones often balance yield and growth better than prime.
- ✓Verify rents independently — don’t rely on the sales brochure.
This guide is general information, not legal, mortgage, tax or investment advice. Rules, rates and scheme availability change — confirm current details with a qualified adviser before acting.