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Divided Britain: How renting in London costs 45% more than a decade ago, but LESS in the North West and North East

  • Rents in London have increased by 45% on average since 2007
  • Compares to drop of 7% in the North West and 4% in the North East
  • Since 2004, tenants have typically spent between 32% and 37% of their wages on rent, compared to 42.2% in London

The North South divide is not just restricted to house prices – a stark gap has emerged in rents too over the past decade, a new report reveals.

While rents in London have soared in the last decade, the same trend has not materialised in northern parts of the country.

In the capital, rental costs have surged 45 per cent since 2007 to reach 1,609 a month, according to data by analysts Hometrack. However, in two areas – the North West and North East – rents have actually fallen, seven per cent and four per cent respectively.

Divide: Rents in London have soared 45% since 2017 - but have fallen in the North East and North West

Divide: Rents in London have soared 45% since 2017 – but have fallen in the North East and North West

This means it now costs more than three times as much to rent the typical home in London as it does in the North East.

Hometrack, which compiled the report, says the disparity is down to faster jobs growth in the capital compared to the rest of the country, which it says feeds through to higher demand for rentals.

For example, the report highlighted how London has seen a 12.5 per cent increase in full-time employment since 2010, compared to three per cent in Birmingham and five per cent in Manchester.

The study also made reference to the lower wage growth in some parts of the country.

This has helped to make renting unaffordable for many people. For example, the amount that tenants pay to live in the capital has increased by 4.5 per cent a year since 2010, but their growth in earnings have failed to keep up.

By contrast, the annual rental growth across the whole of the country, excluding London, has averaged 2.7 per cent and largely tracked the growth in wages, making some places to rent outside of the capital more affordable.

RISE IN RENTAL COSTS IN THE UK DURING THE PAST DECADE 2007 Q1 2017 Q1 % change London 1,107 1,609 45% S East 848 1,085 28% East 740 937 27% E&W 752 927 23% S West 666 802 20% W Mids 576 650 13% E Mids 564 633 12% E&W ex London 526 598 14% Wales 588 598 2% N West 624 581 -7% Y&H 571 568 0% N East 539 519 -4% Source: Hometrack

In the South and the Midlands, rental growth started to outpace earnings from 2013 onwards as economic conditions improved after the credit crisis and subsequent recession.

The rental study suggested this led to a 20 per cent increase in average rental values during the past 10 years.

Meanwhile, it claimed that nationwide, tenants spend between 32 per cent and 37 per cent of earnings on rent, compared to 42.2 per cent in London.

Rent to earnings: The amount people spend on rent compared to wages has rocketed in the capital

Rent to earnings: The amount people spend on rent compared to wages has rocketed in the capital

Richard Donnell, insight director at Hometrack, said: 'London has the largest and most liquid rental market.

'Demand in the capital has been buoyed by employment levels rising two to three times faster than other regions, as well as the much higher deposit and household income required to buy making the transition from renting harder than in the past.'

A separate report by Nationwide Building Society last week revealed that house prices in the North are growing faster than in the South for the first time in eight years in percentage terms.

But despite that, the average property price in London reached 478,142 in June compared to just 125,237 in the North.

Rents in London have increased by 45% on average since 2007, according to Hometrack

Rents in London have increased by 45% on average since 2007, according to Hometrack

Mr Donnell added: 'An important factor is the growth in sharing among renters which means in many parts of London there are multiple incomes combining to pay the rent.

'This is a particularly strong trend in in inner London where a high percentage of rented homes are fully occupied.

'Outside London the drivers of rental demand have been more muted and the resulting impact on rents is less pronounced.

'However, increased economic activity is feeding into demand and resulting in increased levels of rental growth, at a rate more in line with earnings growth.'

He continued: 'Ultimately rental levels need to reflect affordability and the buying power of tenants.

'In London affordability is stretched and demand is weakening on concerns over the outlook, which we expect will lead to average rents in the capital falling by one to two per cent in 2017.

'Conversely, rental growth outside of London is set to continue to track earnings growth with rents rising at two to three per cent a year.

'The greatest upside for rents is in the midlands and northern regions where rental affordability is the best it has been for a decade.'

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Journalist, writer and broadcaster, based in London and Paris, her latest book is Touché: A French Woman's Take on the English. Read more articles from Agnes.

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