At £1,316 per month, the average cost of renting a home in Greater London is now almost three times more expensive than in the North East, where tenants are paying £492 per month, according to new research.
The March 2014 HomeLet Rental Index shows despite a monthly decrease of 0.2%, tenants in the Capital are still paying rents that are 7.3% more expensive than the same time last year. In contrast, the North East’s monthly and annual decreases of 2% and 16.6% respectively, means the region’s average rental amounts are at their lowest since January 2010.
When comparing the Capital’s average rental amounts in March 2009 and March 2014, tenants are currently paying rents that are 38% more – an additional £364 per month or £4,368 per year. This is a significant 57% of their average net income that has only increased by 11.8% during the same period.
Those in the North East however are currently paying 2.7% less of their disposable income on their rent than the same time five years ago. According to this month’s data, 33.7% of tenants in the North East’s disposable income is spent on rent – almost a quarter less than their counterparts in the capital.
Martin Totty, Barbon Insurance Group’s Chief Executive Officer, said: “We’re seeing an increase in the number of people who are opting to rent as their preferred choice of living. The private rented sector offers many advantages to tenants – whether they’re students, professionals or families looking for a long-term home.
“The flexibility of renting a home means tenants are able to move into a new home within weeks. It’s an alternative housing solution for a range of people and it’s increasingly the preferred choice of many. There’s certainly been a shift in the demographic, expectations and lifestyle of tenants within the private rented sector, and I believe the trend of ‘generation rent’ will continue to grow for the imminent future.
“Although the monthly figures show a relatively little movement during the past three months, the latest HomeLet Rental Index’s quarterly and annual figures show rents within the private rented sector are growing at a much higher rate in the North than the South.
“When looking at the top 25 areas of rental growth versus the lowest 25 across the whole of the UK, we can see almost half of those in the top sector are within Greater London or the South East – compared to the lowest 25 areas where almost half are northern regions, including Yorkshire and Humberside, the North East and North West.
“Greater London and the South East’s rental markets are growing at a much higher rate than anywhere else in the UK. Therefore although rents are higher, it appears people are being drawn to the Capital to take advantage of its job opportunities and lifestyle. Tenants in the South – particularly in the Capital - are paying 10% more of their disposable income on rent than they were five years ago.
“However, despite increasing rental amounts, more people are choosing to rent a home in the Capital. During the past 12 months we’ve seen a five per cent increase in the percentage of tenants moving into the Greater London or South East regions from other regions across the UK.
“Therefore it’s not surprising the Capital is home to the highest number of tenants per property than anywhere else in the UK. Currently 2.2 tenants live in each rented home in the Capital – an increase of 22.7% over the past five years.
“It appears the Capital’s thriving economy and job prospects are attracting more people to move to the area. However, the increase in demand will inevitably reduce the supply.
“I believe rents will rise further this year, and with rents in the Capital currently just over 95% higher than the rest of the UK (when the Greater London figure is removed), I think it’s only time before this reaches double.
“The recently released English Housing Survey reveals the number of people living within the private rented sector has almost doubled since the early 2000s. The report also shows nearly half (44%) of private renters expect it will be five years before they’re able to buy a home – compared with only a quarter (23%) who anticipate they will be in a position to buy a home within two years.
“The private rented sector – that was once seen as a last resort - is a thriving market that’s an increasingly popular choice for people across the UK. The industry is growing, and will continue to do so.”