Central London was the focus for many buy-to-let investors, but the competition is now moving to the suburbs of London as graduates shun paying premium rents for something longer-term and more affordable.
Rents in central London have risen so fast that in areas such as Camden the average monthly rental can be as much as £2,219 per month.
Central areas of London are popular with students however graduates are looking further afield but within commuting distance to the capital. Graduates are no longer willing to spend 75% of their earnings on rent and would rather pay less with a bit more travel over a longer period.
Rents in the outer London boroughs of Bexley, Havering and Sutton are £1,004, £1,125 and £1,056 respectively reasonably cheap when compared to more popular areas such as Hackney and Southwark (£1,728 and £1,690 respectively.)
Tahir Farooqui, chief executive of a property app, Canopy, that helps renters and landlords manage deposits said, “The focus of this generation is finding somewhere to rent on a long-term basis. There has been a real mind-shift among millennials to a more European way of looking at property ownership. Many are accepting that they will rent for many years. Not least because of the cost of studying.”
John Goodall, chief executive and founder of Landbay a peer-to-peer lending company said the outer London boroughs were not seen as the most desirable locations to live.
“But they may be worth the longer commute to reduce the rent burden and give young professionals hope of saving for a deposit on a house of their own one day. For those moving to London, new graduates have a tough decision to make but for many, affordability may ultimately make the decision for them,” he says.
Top ten outer London boroughs | Average yield and rent
Year ending 31 August 2017
1. Bexley (YoY% 1.98 / Av.£ 1,004)
2. Sutton (YoY% -0.23 / Av.£ 1,056)
3. Havering (YoY% 1.59 / Av.£ 1,072)
4. Croydon (YoY% 0.02 / Av.£ 1,125)
5. Bromley (YoY% 0.47 / Av.£ 1,169)
6. Hillingdon (YoY% 0.38 / Av.£ 1,192)
7. Barking and Dagenham (YoY% 1.49 / Av.£ 1,203)
8. Lewisham (YoY% -0.16 / Av.£ 1,232)
9. Redbridge (YoY% 1.08 / Av.£ 1,249)
10. Enfield (YoY% 0.88 / Av.£ 1,252)