Londoners are adopting the European property habit of renting instead of buying a home. In continental cities such as Paris, Berlin, Brussels and Amsterdam, up to 60 per cent of households rent privately — far higher than in London, where the figure is less than 15 per cent. However, private renting in the capital — which was popular right up to the Sixties, before the home-ownership boom of recent decades — is becoming a new lifestyle choice.
A whole raft of recent surveys and reports shows that home ownership has lost some of its sparkle; the attitude of many people to ownership has simply changed, and not because they have been priced out of the owner-occupation market.
Almost 50 per cent of private renters are aged below 34, and about 55 per cent of the total 3.1 million renters — a million more than 10 years ago — are either singles or childless couples, according to government figures. A growing number have no wish to buy a property, and say they never will. Families and middle-aged downsizers are getting in on the rental act, too (see below).
How the figures add up
Renting allows people more choice and enables them to be more flexible. Apart from lifestyle, there can be compelling financial reasons for renting. Buyers incur much higher costs when moving: stamp duty, legal and survey fees typically come to about £50,000 when buying a £500,000 property. And often, the amount borrowers pay in mortgage interest (not the capital repayments) is more than the rent for an equivalent property. Renters can also take advantage of price dips to enter the market and buy a bargain.
The huge number of better-quality homes available to rent in London leads renters to say they can find homes that are bigger and in a more desirable or glamorous neighbourhood than they could ever afford if they were to buy the same house.
“About 200,000 households have been added to the London rental market over the past decade,” says Adam Challis of property consultant CB Richard Ellis. “The stigma of renting is fading for the younger generation of professionals. Many more people are realising the benefits of flexible housing arrangements.”
Renting should be a middle-class aspiration, according to Jonathan Shaw, Minister for the South-East.
Giving evidence to a parliamentary housing inquiry last month, he said: “Renting is perfectly desirable and meets needs and aspirations. It should be seen more as something that people across the socio-economic spectrum do.”
The Government and the property industry are trying to hatch a new “business model” for private rented housing. Backed by institutions such as big insurance companies, it is likely to take the form of a mid-market “hotel chain”, with branded, well-managed, affordable accommodation in prime central locations.
Home ownership is deeply rooted in British culture, and for many owners property has proved a handsome investment when looked at over many years. Often renting is dismissed as “dead money”, but studies show that on average it is cheaper than buying over a 25-year period — £11,342 less, according to a report published last week.
Demographic changes — more single households, economic migrants, divorcees and students — are boosting rental demand. Moreover, people are getting married and starting families much later in life, so the average first-time buyer age is creeping up, from 27 in the Eighties to 36 now.
Forty-eight per cent of all private rented homes in the UK are in “suburban locations”. Remarkably, only eight per cent are in city centres.
Be part of the action
Rental properties are available at every level of the market in London, from cheap studios to luxury houses, from about £120 to £12,000 a week. Niche companies are sprouting up to serve this burgeoning business. Residential Land has assembled a portfolio of 1,200 homes in central postcodes. Private developers are embracing rentals, too, letting flats instead of selling them because they provide a steady stream of income.
Aristocratic estate landlords such as Cadogan, Grosvenor and Howard de Walden, all past masters at property investment, now routinely offer rentals (rather than granting long leases), as do charitable trusts. Walcot Estate, an oasis of Georgian and Victorian properties within the parliamentary division bell in Kennington, benignly gives grants to local community groups from the rents it receives, helping to improve the neighbourhood in which renters live.
Three- and four-bedroom houses are available for rent at £550 a week through Cluttons (call 020 7407 3669). Winkworth, which has an extensive network of branches across London and in the suburbs, has found a considerable variation in rents.
Where to look and what to pay
In general, rents are lower in south London, outer north London and parts of east London. While the cost of a one-bedroom flat in Notting Hill ranges between £1,200 and £2,600 a month, in Crystal Palace it is considerably less, at £625 to £820.
Three-bedroom houses in Islington range from £2,000 to £4,500 a month. In Kensington & Chelsea, the price range is £3,600 to £8,500 a month. For more information, visit www.winkworth.co.uk.
Figures by FindaProperty.com show that the average London rent for a flat is £1,487 a month, and for a house it is £2,264. You can find out the cost of renting in any area of London by using a new interactive website set up by Mayor Boris Johnson. Simply key in the street or postcode and you get area averages for the size of accommodation you want.
This “rents map” reveals that South Kensington is the most expensive place in London to rent (typically, £625 a week). However, the current average rent for a shared house in the capital is only £92 a week. Visit www.london.gov.uk/rents for more information.
Such is the competition for rental properties that central London lettings agent WA Ellis reports “bidding wars”, with tenants paying 20 per cent or more over the asking rent.
Gumtree.com, a rental website, says there has been a 36 per cent “spike”, or increase, in the number of flat and house shares in London over the past year. Owners renting out rooms to get extra income during the recession may have boosted supply.
But there is no doubt that the London rental sector is undergoing a sea change.