Rents in some London boroughs have jumped by 50% in the last decade and could do so again in the next ten years, exclusive analysis for The Standard reveals.
The research will increase fears that the capital is becoming impossible to afford for all but the most privileged and that there will be a “brain drain” of talent away from London, especially among the young.
Analysis by Zero Deposit, the tenancy deposit business, shows that average monthly rents are up 44% in Barking and Dagenham, 53% in Bexley and 45% in Lewisham.
Zero Deposit analysed historic rental market data looking at the annual cost of renting in each borough of London, how this compares to the average salary and how the two have changed over the last decade (March 2013 vs March 2023 - latest available).
The research shows that a decade ago, the average London tenant was paying £17,100 in rent per year for the pleasure of living in the capital - £1,425 per month.
Today, this figure has climbed to £1,751 per month, totalling £21,012 over the course of the year.
This means the cost of renting has increased by 22.9% in the last decade, requiring the average London tenant to spend almost £4,000 more per year to cover the cost of a rental property.
At the same time, the average earnings within the capital have increased by £7,558 from an average salary of £36,632 in 2013 to £44,190 today. But while this monetary increase may be greater than that seen with respect to the increased cost of renting, it equates to a jump of 21%.
This means that over the last 10 years, the cost of renting for the average London tenant has increased by 2% more than the earnings available to them.
Of course, this reduction in rental market affordability is far greater in some boroughs compared to others and it’s the London Boroughs of Bexley and Kingston that have seen the largest outright increase to the cost of renting over the last 10 years, with a 53% increase.
However, in the current market it is Westminster that ranks as one of the least affordable, with the annual cost of renting requiring tenants to spend 64% of their yearly income. This is up from 43% just 10 years ago, one of the largest increases of all boroughs.
But this high cost isn’t a problem confined to prime boroughs alone. London tenants are required to spend more than half of their annual income on the cost of renting across Newham (54%), Camden (54%), Barking and Dagenham (52%), Southwark (52%), Merton (51%), Hackney (51%), Hammersmith and Fulham (51%) and Enfield (50%).
Rents could boom even more in the next ten years, predictions from Benham and Reeves suggest. If current trends continue, average London rents would hit £2152 a month by 2023, and would top £1600 in every single borough. A typical property in Westminster could fetch as much as £3,871 a month.
Westminster has also seen the largest affordability gap materialise over the last decade when comparing rental growth to earnings growth. The average rent across Westminster has climbed by 27%, while the average salary has reduced by -15%, a total shortfall of 41%.
In Kingston, the average salary has increased by just 14% versus a 53% jump in rents, meaning renting has become 39% less affordable in the last 10 years, while Redbridge has also seen a 36% gap open between the increase in the cost of renting and earnings growth.
Sam Reynolds, CEO of Zero Deposit, said: “London tenants are struggling with rental affordability, and with huge increases to the cost of renting in many boroughs it’s easy to see why. When you also consider that rents have risen faster than earnings in all but a handful of London boroughs, this makes the tough task facing tenants all the more daunting.
"In the past few years the market has been rocked by rising energy costs and mortgage rates, while the lack of supply to meet demand is also serving to push up prices in previously affordable regions.
"This means that those reliant on the rental sector in order to live can face incredible competition when searching and an even larger financial barrier when it comes to placing a deposit and covering the asking rent on a monthly basis.”
Marc von Grundherr, director of Benham and Reeves, said: “The London rental market is incredibly busy and while this has driven rents up considerably, the average cost of renting really doesn’t tell the full story. Yes, professional tenants looking for one or two bed apartments do form a good chunk of the market and so £1,700 per month may be a realistic benchmark for a one or two bed property in some areas.
“However, we also have a great deal of families coming to us, both domestic and international, looking for larger homes with multiple bedrooms.
"Across London, the average rent for a four-bed property sits at over £3,000 per month in the current market, almost double that of the wider London average, although this cost is as high as £12,000 per month in London’s more prestigious pockets.
“So for those who require larger rental homes, the monthly cost of rent can be quite alarming, to say the least, and they are unlikely to find something suitable for £1,700 per month.”
