15th January 2016
A shortage in properties has seen rents in London rise twice as fast as wages.
Monthly data from Landbay London Rental Index showed the average eLondon rental prices performed strongly in 2015, despite a seasonal dip in December.
Average monthly rents ended the year down -0.4$ from £2,053 in November to £2,046 in December. However, when compared to 2014, rents were still up 4%.
In bad news for tenants, London rents grew twice as fast as wages, which climbed 1.6% in 2015.
Nearly three-quarters (73%) of London boroughs saw rent outpace wage growth in 2015, which is being blamed on a shortage of properties on the market.
Compared to average 2014 rents, three bedroom properties in the capital saw the biggest increase in rental prices, up 6% from £2,863 to £3,035.
Boroughs outside zones 1 and 2 experienced an acceleration in rental prices last year as more people move further from the centre of London in search of affordable rates. Barking and Dagenham saw rents increase 7.9%, Waltham Forest rents were up 7.8%, and in Bexley growth was 6.5%.
More central locations have seen rents fall; in Tower Hamlets rent was down 4.2% and -2.4% in Islington.
John Goodall, chief executive of Landbay, said: ‘Despite a small seasonal dip towards the end of the year, London rents rose significantly ahead of wages in 2015.
‘Rents often track wages as consumers with more pay compete for the most desirable rental properties, but the fact that rents in London are outpacing wages is a clear sign of the shortage in properties to rent as the capital faces an acute housing crisis.’
And rents could be pushed higher following a government clamp-down on buy-to-let.
‘Based on its recent policy changes for the private rental sector such as the new stamp duty surcharge and changes to tax relief on mortgage interest, the government seems intent on weeding out amateurs form the ranks of new buy-to-let investors,’ said Goodall.
‘If it is successful, our rental index suggests that the result could well be higher rental income for the professional investors who are not affected.’