Rent ‘reality gap’: London’s tenants are paying more than official data suggests

Rent ‘reality gap’: London’s tenants are paying more than official data suggests

9:24 AM, 28th April 2023, About 10 months ago 2

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Renters in the capital are paying 37% or £613 more per month than official statistics suggest, research reveals.

The findings from lettings and estate agent, Benham and Reeves say that high demand is pushing up rent prices – and creating a ‘reality gap’.

That’s because official figures from the Office for National Statistics (ONS) show that average London rents are currently £1,672 – up 4.7% in the last year.

But the agent’s research shows that the average asking rent of properties in London currently is £2,285 – which is £613 higher than the ONS figures.

‘London rental market is performing incredibly’

Marc von Grundherr, a director of Benham and Reeves, said: “The London rental market is performing incredibly well at the moment.

“Demand is high with students and city professionals returning to the capital after the pandemic.

“Furthermore, foreign buyers are using the rental market to try before they buy, and this is adding an additional layer of demand.”

‘People may be entering the market with an unrealistic expectation’

He added: “However, many people may be entering the market with an unrealistic expectation of just what and where they can afford to rent despite having researched the market beforehand.

“This is down to the fact that government rental data is lagging behind the reality of current rental prices, essentially showing yesterday’s prices instead of today’s.

“As such, many renters are finding they simply don’t have the budget to secure a rental home in what is currently a very competitive market.”

Mr von Grundherr said: “With an average rental reality gap of £613 per month, those looking to rent need to ensure they either have enough to cover the higher than expected costs or accept the fact that they are going to have to extend their search to slightly more affordable areas.”

The biggest rent price reality gap

The research shows that the biggest rent price reality gap is in the City of London where, at £3,606 per month, the real cost of renting is £1,702 higher than that stated by the ONS.

In Kensington and Chelsea, the reality gap is £1,333, while in Westminster it is £1,264.

The rental reality gap also surpasses £900 in Wandsworth (£904), Camden (£903), and Hammersmith and Fulham (£901).

London’s smallest rental reality gaps are found in Redbridge (£240), Bexley (£248) and Harrow (£298), although tenants can still expect to pay more than they may have budgeted when researching the market.


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Comments

Ian Narbeth

11:14 AM, 28th April 2023, About 10 months ago

It would be necessary to review the data very carefully but it does not follow that average asking rents of £2285 compared to average rents of £1,672 means that tenants are paying 37% more!
The ONS (which is a well-respected body) is unlikely to be that much wrong. Paradoxically both figures may be correct but it does not follow that tenants are paying 37% more.
I am not a statistician but one obvious answer is that the figure of £1672 includes social housing, less expensive properties and properties subject to regulated rents. It is less likely that people in cheaper housing will be moving so often and the likes of Benham & Reeves will not be offering the cheaper properties. Therefore "asking rents" will be asked of more expensive properties so the average asking rent is much higher than the average rent for all properties.
I am willing to be proved wrong but this is a scare story by the agents. They have gained publicity but it may backfire. I would not want politicians to seize on this as evidence for the need for rent controls or higher taxes for landlords!

northern landlord

12:25 PM, 28th April 2023, About 10 months ago

Surveys and statistics again. The data in this survey is based on the asking rent for properties currently available on the market. The ONS data is based on what renters are actually paying. We know that tenants staying put are not subject to open market rents so many are doing just that and paying below market rent. This is where the difference lies. The latest ONS data I can find on rent levels is from Sept 2022 so a bit out of date. The ONS do urge a bit of caution about using their figures. The ONS prefer to work on the basis of indexes which shows which direction rents are heading in percentage terms but does not actually quantify them. This data is valid up to March this year. It shows that London rents are up 4.8% on 2022 levels but the biggest growth areas in terms of percentage rises were Scotland (5.1%) but by far the biggest rise has been in Northern Ireland (9.9%). I know there were some proposals for the PRS in NI but what is happening to generate this rise. Perhaps a NI landlord can give us some background on this.

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