Rents in London are at the least affordable for a decade, but the North has become cheaper, research from Hometrack claims.
The valuation software provider found strong growth in employment and migration from the rest of the UK and overseas, coupled with constraints in mortgage accessibility had made rents soar in the capital but remain flat elsewhere.
Since 2007 average rental values in the capital have increased by 45% to £1,600, Hometrack figures show.
The South has seen an increase of more than 20% while East England is up 27%.
The rate of growth hasn’t been as high elsewhere, with Yorkshire and Humberside flat, the North West down 7% and the North East down 4% over the decade.
Richard Donnell, insight director at Hometrack, said the reason for the difference was that jobs growth has been faster in London since 2007, pushing demand and rents up, while wage growth has stayed low.
This means as more flocked to jobs in London, rental growth in the capital has averaged 4.5% per year since 2010, rapidly outpacing earnings, according to the report.
Meanwhile, annual rental growth at a national level, excluding London, has been averaging just 2.7% and largely tracked the growth in average earnings.
Donnell said: “Rents fell by between 5% and 12% in 2008/09 and this explains why rents in parts of the country outside of London, where rental growth has been subdued, are only just back to where they were a decade ago.
“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.”
He said rental levels need to reflect affordability and the buying power of tenants.
Donnell predicted rents would decline 1-2% this year in the capital as tenants see their income stretched and demand weakens.