Confidence is returning to the London market, with a resurgence in house prices being anticipated due to increasing rental yields, the latest analysis by Home.co.uk reveals.

The property website predicts that London’s property price recovery will start in Newham and Hammersmith & Fulham due to ‘booming rental yields’ in these two boroughs.

Data shows that the average rental yield in Newham stood at 4.9 per cent in December 2018 compared to 3.6 per cent in December 2017.

This 1.3 per cent increase is the largest rise in any London borough apart from the City of London, where a 1.5 per cent rise was observed.

The average rent in Newham is £1,671, up 7.6 per cent on the previous year.

The next hotspot for investors is set to be Hammersmith & Fulham, according to Home.co.uk, where rental yields increased by 1.2% from 3.9% in 2017 to 5.1% last year. This increase comes amid a 6.2% rise in rents in this West London borough between 2017 and 2018.

Other emerging areas for investors include Hackney and Southwark, where rental yields grew by 0.7 per cent between 2017 and 2018.

Outside of the City of London, Southwark recorded the biggest uplift in rents over 2018, by 20.2 per cent. The average rent in this borough is now £2,532.

There was a 0.6 per cent rise in yields over the same period in the City of Westminster and Tower Hamlets.

Rents in Westminster rose by 12.1 per cent last year and the average rent stands at £5,505, while rents in Tower Hamlets rose by 10.1 per cent and the current average rent is £2,350.

The property website anticipates that ‘improving’ rental yields will make property in London ‘more attractive to investors’.

Home.co.uk director Doug Shephard said: “You just can’t ignore the London property market’s remarkable ability to bounce back.“History has shown us time and time again how the UK’s leading property market can burst back into growth after a period of correcting prices.

“The rate of rental yield rises is surely the best analytical tool to pinpoint where the first ‘green shoots’ will emerge.”