Both tenants and investors are looking beyond London as the UK’s capital is named the second most expensive city in the world in terms of rental prices.
- Londoners are spending 45% of their wage on rent
- The UK capital is ranked as the world’s second most expensive city in which to rent
- More renters are looking outside of central London to cheaper, more affordable boroughs with good transport links to the city
The cost of renting a one-bedroom apartment in the UK’s capital city is now almost half the average Londoner’s monthly salary.
A new study carried out by Barratt London ranked cities around the world based on what proportion of their salary inhabitants spent on rent.
With Londoners spending 45% of their wage on rent, the study revealed London to be the world’s second most expensive city for renters, beaten only by San Francisco at 47% and closely followed by Hong Kong (44%) and Tokyo (42%).
Looking purely at rental prices, the average £1,250 monthly cost for a one-bedroom apartment in London is cheaper than that of New York at $4,225/£2,532. However, while rents in New York are almost double that of London, the average wage in the US City is considerably higher, meaning New Yorkers only pay 40% of their salaries to landlords – 5% less than those living in London.
A spokesperson for Barratt London commented: “Rental prices in London continue to demand too much of the occupier, to the extent of almost half of their monthly pay cheque.”
What’s more, over the last six years London rents have increased by 23% while the rest of the UK has seen an increase of just 14%.
As a result, the London rental market is showing signs of topping out. 2016 marked 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.
Responding to this drop in tenant demand, many landlords are also looking beyond the capital to other areas of the UK where the upfront cost of property is lower and potential yields significantly higher.
Experts now predict 2017 will see a number of investors gravitate northward from London towards prime regional cities such as Manchester and Birmingham, which are predicted to see above average price inflation during 2017.