London BTL Yields Lag Behind Record Highs: How Serviced Accommodation Closes the Gap

Record National Yields, but London Landlords Are Left Behind

The latest data from Paragon Bank paints a striking picture: national buy-to-let yields have climbed to 7.22%, the highest level since 2011. For landlords across much of the UK, this is welcome news after years of tightening margins, rising costs, and regulatory headwinds.

But if you own rental property in London, that headline number probably feels like it belongs to a different market entirely. And in many ways, it does.

London's elevated capital values mean that even with strong rents, the percentage yield remains stubbornly low compared to the rest of the country. Rent growth in the capital has also started to decelerate, lagging behind nearly every other region. The result is a structural yield disadvantage that traditional assured shorthold tenancies simply cannot overcome.

So what can London landlords do? Sell up and reinvest in Manchester or Birmingham? That is one option. But there is another, closer to home, that more and more savvy investors are exploring: the pivot to serviced accommodation.

What Is Serviced Accommodation and Why Does It Matter Now?

Serviced accommodation refers to fully furnished properties let on a short-term basis, typically ranging from one night to several months. Think of it as the space between a hotel stay and a long-term rental. Guests get the comfort of a real home with hotel-level amenities like fresh linens, professional cleaning, and often a dedicated concierge or support service.

For landlords, the economics are fundamentally different from a standard AST. Instead of collecting one monthly rent cheque, you are earning nightly or weekly rates that can be two to three times higher on a per-night basis than the equivalent long-term rent.

In London specifically, serviced accommodation taps into enormous demand from corporate travellers, relocating professionals, project teams, insurance placements, and international visitors. The capital remains one of the world's busiest business hubs, and companies are increasingly choosing serviced apartments over hotels for their comfort, cost-effectiveness, and flexibility.

How the Numbers Work in Practice

Let's put some rough numbers on this to illustrate the yield difference.

Imagine you own a one-bedroom flat in Zone 2, valued at around £450,000. On a standard long-term tenancy, you might achieve £1,800 per month, or £21,600 per year. That gives you a gross yield of 4.8%, which is a full 2.4 percentage points below the national BTL average.

Now consider the same property operated as serviced accommodation. Corporate and short-term rates for a well-managed one-bedroom in Zone 2 can range from £120 to £180 per night. Even at a conservative average of £130 per night and 75% occupancy, your gross annual income jumps to around £35,600. That pushes your gross yield to approximately 7.9%, comfortably above the national BTL average.

Of course, serviced accommodation carries higher operating costs. Professional cleaning, utilities, guest communications, listing management, and furnishing all eat into your margin. But even after these costs, net yields typically exceed what a traditional tenancy delivers, often by a significant margin.

The Pros and Cons Every Landlord Should Understand

The advantages

The income uplift is the obvious draw, but there are other benefits worth noting. Serviced accommodation gives you flexibility: you are never locked into a long-term tenancy, which means you can access your property for personal use, renovations, or sale preparation without navigating Section 21 timelines. You also avoid many of the tenant-related risks that plague traditional landlords, from rent arrears to lengthy eviction processes.

Short-term lets also allow dynamic pricing, meaning you can increase rates during peak demand periods like London Fashion Week, major conferences, or the summer tourist season.

The challenges

This is not a set-and-forget strategy. Serviced accommodation requires active, professional management. Guests need prompt communication, often across multiple time zones. Turnovers between stays demand reliable cleaning and linen services. Listings need to be optimised, pricing adjusted regularly, and reviews managed carefully to maintain high visibility on platforms like Airbnb and Booking.com.

There are also regulatory considerations. In most London boroughs, short-term lets are subject to a 90-day annual limit under the Greater London Council Act, unless you obtain planning permission for a change of use. However, corporate lets and stays over 90 consecutive days fall outside this restriction, which is one reason the corporate and business-travel segment is so attractive for London landlords.

Without the right expertise and systems in place, serviced accommodation can quickly become a full-time job rather than a passive investment.

Why Professional Management Changes Everything

This is where the conversation shifts from strategy to execution. Many landlords are drawn to serviced accommodation but understandably hesitant about the operational complexity. Managing guest enquiries at midnight, coordinating last-minute cleans, resolving maintenance issues remotely, and staying compliant with local regulations is a lot to take on.

The landlords who thrive in this space almost universally share one trait: they do not try to do it all themselves. They partner with a professional management company that handles the entire operation from listing creation to guest checkout.

At Airhosts, this is exactly what we do for London landlords every day. We handle everything from professional photography and listing optimisation to dynamic pricing, guest vetting, 24/7 communication, cleaning coordination, and compliance management. Our landlords earn significantly more than they would from a traditional tenancy, without lifting a finger.

Closing London's Yield Gap Without Leaving London

The conversation around BTL yields often pushes London landlords toward selling their capital assets and reinvesting in higher-yielding regional markets. But this overlooks a crucial point: London property offers unmatched long-term capital appreciation. The real challenge is not the asset itself. It is the letting model applied to it.

By switching from a traditional tenancy to professionally managed serviced accommodation, you keep the capital growth benefits of London ownership while unlocking income levels that rival or exceed the best-performing regions in the country. You get to have your cake and eat it.

Airhosts specialises in making this transition seamless. We work with landlords who are tired of watching their London yields fall behind and want a smarter, more profitable approach. Our clients typically see income increases of 30% to 100% compared to their previous long-term rental income, all while enjoying a genuinely hands-off experience.

Your Next Move

National BTL yields may be hitting 15-year highs, but London landlords do not have to sit on the sidelines. The serviced accommodation model, particularly when focused on the corporate and business-travel market, is the most effective way to make London property competitive again on a yield basis.

If you are a London landlord ready to stop leaving money on the table, get in touch with Airhosts today. We will show you exactly what your property could earn, walk you through the process, and handle every detail so you can enjoy the returns without the hassle. Your London property is already a great asset. Let's make it work harder for you.