LONDON — Rent in the capital is expected to rise for the first time since the financial crisis, with rents now expected to be around £3.50 a month.
The latest London property market report from the property agency RE/MAX, which covers nearly 1,500 properties across the capital, showed rents have risen for the third straight month.
The increase in rents was driven by a sharp drop in the cost of living, as a sharp rise in home prices meant many renters are now facing affordability problems.
While the average rent for a flat is expected by some to increase to around £2,500 in 2020, the number of people renting in London rose by 10.3 per cent to 2,933, the agency said.
Average monthly rent rises across the UK, based on average rent in 2017 London.
The report showed that a majority of households are renting in the London area, but the number has also risen in the north-west of England and in parts of Scotland.
In Scotland, rents are expected to increase by 5.3 percentage points, from £1,200 to £1.2, while in England, it is forecast to rise by 4.2 percentage points to £2.5, according to the survey.
“It is a dramatic increase, which is not surprising given that Scotland’s housing market has been hit by the financial crash,” said the agency’s chief economist, Tom Wainwright.
Scotland’s economy has been battered by the crash in the value of the pound since the Brexit vote.
The UK’s central bank cut interest rates on Tuesday to stimulate the economy.
Scotland’s housing sector is particularly reliant on low mortgage rates and the Scottish Government has been criticised for its handling of the property market.
In London, the average property price rose by 7.5 per cent last year, the biggest annual rise since the start of the recession.
But the increase in rent is a worrying sign for the economy and for renters.
“It shows how hard it is to get the right amount of rent and that a small number of renters are finding it difficult,” said Wainwork.
“There are a lot of renters who can’t afford to pay the rent they would otherwise pay, or they have to pay it in advance.
If the rental market is so hard for the average tenant, the government has no choice but to take a much more aggressive approach.”
The number of rental properties in London has more than doubled since 2010, when it was just a few hundred properties.
Renters are increasingly relying on cheaper alternatives, with Airbnb becoming the preferred option for many of them.
A recent survey of the UK’s largest apartment developers found that only around half of their tenants rent.