Tenants seeking property in the capital may be surprised at what they can actually afford as London rents could be higher than the official figures.
The London area is undoubtedly one of the most expensive places to both buy and rent property in the UK. It remains hugely popular among investors and tenants alike, and the ongoing lack of supply compared to demand in the city is keeping prices high.
Rents across the country are at a record high at the moment, but London rents are the priciest, at £1,672 per month according to the most recent data from the Office for National Statistics (ONS). This is the figure for the month of March, and represents a 4.7% increase compared with March 2022.
However, landlords in the capital are actually listing their properties at higher prices than this, meaning tenants looking for homes at the moment may be surprised at the extra costs they could be faced with. This is according to analysis from Benham and Reeves, looking at homes that are on the market right now.
Reality gap for London rents
The research from Benham and Reeves suggests that the actual gap between current asking prices could be 36.6% higher, on average, than the ONS data. Taking into account the rental properties currently on the market in London, average rents are actually £2,285 per month.
Incredibly, in the City of London, current asking rents are a huge £1,702 per month higher – at £3,606 per month – than the ONS figures suggest. Meanwhile, in Kensington & Chelsea, also known for its pricey property, asking rents could be £1,333 per month higher.
This means some tenants seeking homes now could be surprised by how much homes are being listed for, and may have to reconsider the property type and area they can actually afford. For others, the high London rents may be a reason to relocate further afield.
Of course, not all asking rents will be met, with some tenants able to bring the price down by negotiating with the landlord. However, in the current market where the level of tenant demand often significantly outstrips the quantity of homes available, there may not be much room for haggling.
London market remains competitive
Over recent years, the housing market in London has arguably lagged behind some other parts of the UK in terms of prices. Being the most expensive area, factors such as the cost of living crisis have encouraged people to look to more affordable areas, bringing down demand in places like the capital.
Regions such as the north west and the Midlands, on the other hand, have attracted both people and businesses away from London, with more and more large companies setting up bases in alternative cities. This has boosted the jobs markets in places like Manchester, Birmingham, Liverpool and Sheffield.
Honing in on London rents, while many tenants will continue to want to live in the capital, the high prices alongside the growing number of opportunities in other parts of the country could encourage relocation for those who cannot afford the higher costs.
Commenting on the latest figures for London rents, Marc von Grundherr, Director of Benham and Reeves, said: “The London rental market is performing incredibly well at the moment. Demand is high with students and city professionals returning to the capital after the pandemic.
“Furthermore, foreign buyers are using the rental market to try before they buy and this is adding an additional layer of demand.
“However, many people may be entering the market with an unrealistic expectation of just what and where they can afford to rent despite having researched the market beforehand.
“This is down to the fact that government rental data is lagging behind the reality of current rental prices, essentially showing yesterday’s prices instead of today’s. As such, many renters are finding they simply don’t have the budget to secure a rental home in what is currently a very competitive market.
“With an average rental reality gap of £613 per month, those looking to rent need to ensure they either have enough to cover the higher than expected costs, or accept the fact that they are going to have to extend their search to slightly more affordable areas.”