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Is Renting the Only Option in London?

Is Renting the Only Option in London?
This guest post is brought to you by property expert, Christopher Watkin, who has more than 20 years experience in the industry.

Inflation, as calculated by the Government's Consumer Prices Index, rose by 0.3% over the last 12 months. And in November, the Office of National Statistics stated average wages only rose by 1.8% year on year, so when adjusted for inflation, Londoners are 1.5% better off in 'real' terms.

The question is: what does this mean for London's tenants?

The answer is bittersweet.

The average rent that tenants have to pay for their Private Rental Properties in the capital rose by 3.8% in 2015, significantly beyond the inflation and wage changes. In 2014, rents rose by 3.0% (and salaries by just 0.2%), another significant difference.

However, it's not all bad news for London tenants; in 2013 rents rose by 2.5% in comparison with a much greater salary increase of 2.2% - so there is a time in recent history where sustainable changes have occurred.

It must be noted that London rents have risen 27.6% since 2005, just about matching inflation which, over the same time frame, rose by 27.8% (although salaries were only 22.3% higher over the same time period).

In theory, this is unsustainable.

Yet, renting is the only option for so many Londoners, especially those who have to earn to stay in the capital. Rents may be ballooning, but house prices are well beyond the means of most prospective buyers. Yes, buyers may be reassured by a slowing rate of house price growth in London and the Right-to-Buy scheme, but this does not automatically make property affordable for the majority of workers.

For better or worse, the sustainable option is to remain a tenant - you save yourself the stress of saving and buying, you get to keep that extra wage increase for yourself, and there are no guarantees that you will be better off in the long run if you do end up buying.

My prediction is that renting in the London is only going to go in one direction in the future: up.