Rent hikes causing a brain drain in the capital

It comes as no surprise that professionals in their twenties are increasingly finding themselves priced out of the capital.

A confluence of factors has been driving rents in the city higher, including elevated interest rates that have both raised mortgage costs for landlords and locked out more would-be buyers from the real estate market, creating more demand for rentals. Only one unit was available for every six people looking to rent this September, one of the tightest markets in recent history, according to Spareroom.

This is reflected in conversations over pints and weekend dinner parties, particularly during the peak rental seasons, when tales of tiresome bidding wars and hour-long queues to view a property, are commonplace. Even then, for those fortunate enough to secure a property, they’re likely shelling out sometimes hundreds over original asking price.

Regardless, there is a large percentage of twentysomething renters in the capital who aren’t lucky enough to find a rental, let alone afford one. Many are adopting alternative solutions: returning to family homes, embracing remote work opportunities, or relocating to more affordable cities.

About 48% of renters in their 20s who changed apartments have moved outside the capital this year in the first uptick since before the pandemic, according to data from Hamptons. That comes as rent surges, jumping 16% year-over-year in September, an increase that outpaced a 9% gain on average across Europe.

The knock-on effect of this has already been seen across many industries, as young people leave London, taking their talent with them. A brain drain is hitting the city (and has been for some time); this is seen increasingly with the younger and more junior hires – even in relatively well-paid jobs - whose salaries are unable to sustain London property prices.

To maintain the same standard of living as in 2020, Londoners would need to spend 25% more a week, according to the charity, Trust of London. Meanwhile, data from UK research centre Institute for Fiscal Studies show that salaries in London rose just 5% in that time frame.

In short, many of London’s employees have crossed counties, countries, and continents to work in the capital but London’s rental crisis means the capital is missing out on the value of that talent.

Failure to attract and retain diverse, well-rounded, skilled people for all types of work undermines the rich mix of abilities needed to make the city (not to mention the workplace) functional and prosperous. Despite its charm and global appeal as a financial centre and dynamic multicultural city, the capital is becoming an unsustainable place to live for young people, becoming less competitive on the global stage as a result.

If London is to remain a magnet for talent, then the city’s rental market must be addressed. In the meantime, there is opportunity for our regional cities to attract those talented young people on the hunt for a new city to make their home.