How does London’s property and rental market compare with the rest of the world?
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With prices for both buying and renting property on an uncontrolled upwards spiral in London it’s tempting to assume that the grass is greener on the other side and that people the world over have it better. But are other urban centres around the world really better off when it comes to housing?
Berlin is widely seen as a renters’ paradise, but the housing market’s reputation for being a sound investment, especially following the 2008 crisis, combined with a steady influx of new residents (many of them Brits – there are no restrictions on foreigners buying property in Germany), have caused house prices to soar over the last 10 years. A 120sq m two-bedroom flat with balcony will cost about €1 million according to the Financial Times. The developers have moved in and newbuild apartments went up 79 per cent between 2007 and the first quarter of 2014 according to economic think tank Institut der Deutschen Wirtschaft.
Yet over 85 percent of Berliners still rent their homes, as opposed to 49.5 per cent of Londoners. Berlin is also the first German city to introduce a rent-cap, where landlords cannot increase rent by more than 10 per cent over the local average, as a measure to protect affordable housing – in the month following the introduction of the cap, rents fell by three per cent.
Scandinavian countries tend to elicit the strongest grass is greener feelings for Brits, who look at their generous welfare and rent-controlled housing with envy. Buy-to-let is frowned upon and seen as speculation, while a studio apartment in a desirable part of central Stockholm costs around £390 per month rent.
Yet look twice and you’ll discover some of the much-vaunted downsides to egalitarian policies such as rent control in action. Stockholm is in the midst of a severe housing shortage: the average waiting time for a property in the city is eight years, going up to 20 years in the most sought-after areas. Only 40 per cent of Stockholmers rent directly from a landlord and over half a million people are in the official queue for rent-controlled accommodation (which rises barely more than inflation each year).
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Subletting is the rule, as first hand leases are virtually impossible to come by, but second hand renting brings along tenant insecurity and the risk of being illegally overcharged as well as reports of substantial bribes to obtain a direct contract. Meanwhile, there are limited plans for building new housing, and property prices in Sweden have more than doubled over the last 10 years.
Due to the large number of expats on short term stays, landlords in Brussels are often used to foreign renters – but the country’s’ rental laws come with a few quirks.
A typical Belgian lease is nine years and tenants will often be allowed to renovate and refurbish their rental properties. Rent is cheap and encouraged – Belgians typically spend 25 per cent of their annual income on accommodation compared to more than 50 per cent paid by London renters. Transaction costs are high –typically 20-25 per cent – when buying property.
Shorter term rental contracts of three years do exist but flexibility is minimal and most require a payout of the full duration of the contract if you break contract. Nine year leases are almost always preferable as penalties are limited to three months’ rent, and no penalty applies after four years.
It was recently pointed out that commuting from Madrid to London is cheaper than renting a house in Camden Town and, in many ways, Madrid’s rental prices beat many of its Western European counterparts. It’s not uncommon to find one-bedroom apartments for £500 or less, some being let out for as little as £300.
However, a typical Madrid apartment may not meet quality expectations, as the rental market is still underdeveloped for a Western capital. But just outside the city centre, properties are cheaper, larger and better quality. In Madrid, the rat race that is the London housing market is largely avoided, as properties are typically let on a first come, first serve basis.
The property market remains volatile in the wake of the 2008 crash, with Madrid homes having lost as much as 45 per cent of their pre-crash value, although there are signs that a corner may have been turned this year with a wave of wealthy Latin American house-hunters hitting the streets, according to the Financial Times.
It’s no secret that the Big Apple is a gladiator’s’ arena when it comes to finding a suitable apartment. With cut-throat competition, the house-hunt might well take over your life for a month or two. Rental prices in NYC only ever seem to be on the increase, and you should expect to pay an average of $7,225 (£4,778) per month for a 120sq ft property, according to the Global Property Guide. This is compared with the average London rent of £1,400 per month, as estimated by Savills.
New York’s rental properties come in the form of rent regulated, subsidised and unregulated or ‘market rate’ properties. With unregulated properties, matters are directly negotiated with the landlord as opposed to being regulated by law. Regulated properties are sought after but scarce, as there is a low turnaround of only 100,000 out of 1,000,000 becoming vacant each year. Meanwhile the median sales price for property in Manhattan is $970,000 (£640,000) compared with £499,997 in London.
It has sea, surf and sun but Australia is the third least affordable country in the world in which to buy property according to the IMF (and believe it or not, London is not one of the top two) and prices have risen 44 per cent over the past three years.
Competition for rentals in Sydney is fierce and, as in London, it’s not uncommon for bidding wars to result. It’s unsurprising therefore, that rents are high, and rising and in the Australian capital and most expensive city, average rent is $530 AUD (£248) per week. Rent rises have been attributed to the high rates of buy-to-let investment and low numbers of first time buyers, although foreign property investors are theoretically restricted to new builds.