Amidst a 68% growth in property prices, London’s rental market is now showing signs of topping out, with both investors and tenants looking to property outside of the city.
- The average London house price has increased by 68% since 2011
- Rising rental rates are outstripping wage growth in the city
- More renters are looking outside of central London to cheaper more affordable boroughs with good transport links to the city
Central London is simply becoming too expensive for most people, regardless of whether you want to buy, invest or rent. According to the latest figures from the Office for National Statistics (ONS), since 2011 average London house prices increased by 36% more than prices across the rest of the UK.
Without accounting for inflation, the average house price in London has increased by 68% since 2011, compared to the UK as a whole, which has seen half the amount of growth, at 32%. The story in the rental sector is much the same, with London rents increasing by 23% over the last six years, while the rest of the UK has seen an increase of 14%.
While house prices have risen faster than wages everywhere in Britain, the ONS reports, median earnings across Britain as a whole, have succeeded in keeping pace with rent inflation. In London however, renting is considerably more expensive, outstripping wage growth, meaning renters who can’t afford to get on the housing ladder are trapped, spending an increasingly large share of their pay on rent.
Amidst these continually climbing prices, the London rental market is showing signs of topping out. 2016 saw a year of declining tenant demand, with many taking the practical decision to move out of the city to more affordable suburbs with good transport links.
Landlords have been quick to respond to this drop in tenant demand, with many also turning their backs on the capital and looking to other areas of the UK where the upfront cost of property is lower and potential yields higher.
Experts believe that investors will now naturally gravitate northward from London, towards prime regional cites such as Birmingham and Manchester, which are predicted to see above average price inflation during 2017.