Photographer: Matthew Lloyd/Bloomberg

London Luxury Home Rents Are Falling Behind Inflation in U.K.

  • Rents in Prime Central London have risen 13% since 2005
  • Home values in best districts have more than doubled in period

If you think inflation’s been going nowhere, you should take a look at London luxury home rents.

The cost of leasing homes in the capital’s best central districts rose by 13 percent in the last 10 years, less than half the rate of inflation, according to broker Savills Plc. Home values in the same areas more than doubled in the period.

The slowdown in rental growth is being caused by international companies budgeting less to house executives than before the financial crisis and because weak wage growth is limiting increases, according to Neal Hudson, an associate director at Savills.

“The general compression in global yields since the credit crunch has helped drive property values up relative to their underlying rental income,” Hudson said. “You’ve also got central London acting as a safe haven, so people are less bothered about income return and just looking for somewhere to store their wealth.”

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