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London rents twice the national average

London rents twice the national average

Category: Buy To Let

Updated: 26/02/2014
First Published: 26/02/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

London is known for having notoriously high property prices, and just as high rental prices in comparison. However, figures from BM Solutions have revealed just how significant these differences actually are to the rest of the country, with the average rent paid in the capital being more than double that of the national average.

The research shows that the typical Londoner will pay a whopping £1,417 per month in rent – 102% more than elsewhere in the UK, with the national average being just £701. In cash terms, Londoners saw their rent payments increase by around £135 per month in the year to December 2013, posting an increase of 10.5%. This is compared to the 4% rise witnessed nationally, or an increase of a mere £27 per month in cash terms. Almost meagre in comparison.

As the figures show, Londoners certainly have to pay a whole lot more for their home than those in any other part of the country. Its closest relative is the South East, with renters here facing the second-highest average of £913 per month, and a long way from renters in the North who pay an average of just £501 – a third of that paid in the capital.

The reason for such high prices is arguably a response to rental demand outstripping supply, thereby putting excess pressure on rental prices. Rising property prices could be to blame too – with people unable to get on the housing ladder, more are turning to rental accommodation as an alternative to boost demand even more.

However, rising property prices could also be why buy-to-let (BTL) investors aren't seeing their profits rise in-line with increased rental income. In fact, average gross yields actually fell to 5.5% in the second half of 2013 – down from 5.6% the previous year – indicating that returns are being constrained as property prices are rising faster than average rents.

Nonetheless, it can't be denied that it's a positive time for the BTL sector as a whole. With rental demand expected to continue – and rent increases the likely consequence – the average BTL investor could enjoy significant returns. Additional statistics from the Government-commissioned English Housing Survey found that, for the first time, more people are living in private rented accommodation than in the social housing sector, with no sign of this trend abating any time soon.

This extra demand might put extra pressure on renters themselves, particularly in London where tenants are seeing their already high payments only ever increasing, but BTL investors could easily take advantage of the positive marketplace by sourcing competitive BLT mortgage deals to take their portfolios further.

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