Renting in London; you get what you pay for
The way people rent in London is changing. As more and more struggle to get on to the property ladder young professionals are now looking to rent in new builds.
Young professionals used to follow a well-trodden path into the housing market. They’d leave university, rent for a couple of years and then when settled into their career and established in the town of their choice, then think about buying a small flat. However, times have changed and now more and more young professionals are turning to, and staying in, the private rental sector.
As recently as in 1991, 65% of 25 – 34 year olds owned their own property - now that figure is under 45%. Whether it be rising house prices, inability to save for a deposit or just the recent economic turbulence, one thing is for sure: we are fast becoming a nation of renters.
One of the biggest issues for the current generation is the quality of second hand flats on the rental market. It is not unusual for many to live in a home where the sink controls the shower temperature and you need to master a special ‘knack’ in order to open the front door. I remember in one house I rented there was a complete absence of central heating, leaving us to use the gas cooker to heat the kitchen/dining/living area; the cling film double glazing, while ingenious was pretty ineffective. Clearly, this type of accommodation is not compatible with long term renting. Luckily there is a new breed of private rental property coming forward.
The new generation of PRS schemes are built specifically with long term renters in mind. Already popular in other parts of the world such as the states, they are built to a high specification, placed in locations with good connectivity and offer great amenities. What’s more, being built with long term tenants in mind, there is no fear of your apartment being sold out from underneath you – a factor that allows renters a previously unattainable sense of ‘home’ and permanence.
With all this in mind, it makes sense then that these apartments would command higher rents than traditional second hand rental stock might. So for the second year running we have examined rents in new modern blocks across London (400 blocks to be exact).
Our analysis found that renters in new-build blocks in the capital now pay on average £1,832 a month for two-bed flat; around £245 (or 15.4%) more than the average second-hand rent of £1,587. If you work on a pounds per square foot basis, that translates to £29 psf for a new build in comparison with £25 psf for second hand stock. This suggests that new build rents have increased by 10.4% over the last year compared with 6.5% for second hand stock.
Now bear in mind these blocks still don't offer the holistic management that comes from institutionally owned private rental stock, so this rental premium is merely for better stock. It’s not hard to imagine you could get even higher rents for professional, branded PRS schemes, especially when you consider the biggest complaint renters have is about landlord lethargy in respect or repairs etc.
In terms of location, if we exclude the uber-pricey areas of Westminster, Kensington & Chelsea and the City, the highest rents were recorded in Camden, Hammersmith and Fulham, Richmond upon Thames and Lambeth, where a new-build two-bed rents at around £2,500 per month.
On the other (more affordable) end of the spectrum, we find the boroughs of Bexley, Havering and Sutton where the price tag is closer £1,100 - £1,200 per month. PRS schemes in Barnet, Ealing and Lewisham sit in middle with average rents of £1,625.