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Insight & Opinion

London house prices rising faster than rents

Author: Gemma

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New research has revealed that properties in London are now growing in value at a much faster rate than rents.

The English capital has seen the price of residential property rise at a rate five times quicker than rental values.

This is according to new research by the Mail on Sunday using figures obtained from the Office for National Statistics (ONS).

While this trend is most notable in London, it is not exclusive to the area. In fact, a similar pattern has emerged in England’s regional markets, albeit at a slower rate. The study suggests that property values are rising three times as fast as rents across the rest of the country.

Furthermore, the picture could soon become even more stretched, with forecasters predicting a huge surge in house prices in the next two years.

Comparing prices to rents is important to understand the long-term value of a property. House prices are rising partly due to the increased demand for available property, a factor which should increase monthly rents in turn.

Investors in buy-to-let property will obviously benefit from increasing average rents, but the rising values of residential homes offers further returns on initial outgoings in the long-term. Buying early would be advised, in order to make the most of the growing price-tag on property.

Capital Economics has estimated a five per cent rise in house prices across the country during 2014, with a similar increase to be seen in the following year.

Between January 2005 and December 2013, house prices in London rose by 62 per cent. This is despite a market crash experienced in 2008.

This is in comparison to the 12 per cent rise in rents over the same period, as identified by the ONS.

Across the rest of England, prices of residential property increased by 26 per cent during the same period, in comparison to a nine per cent rise in rents.

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