The world’s best-kept secrets are on the rise, thanks to a growing number of new homes that are cheaper to rent in London than in many of their nearest European counterparts.
The country’s capital has been one of the most expensive places in the world to buy and own property, with the average house cost an average of £4.5m (€6.1m) in 2016, according to the Property Institute of London (PILL).
But in recent years, new apartment towers have been popping up, particularly in the borough of Kensington and Chelsea, with some developers using the area as a cheap and easy source of capital to make their own money.
And the trend is picking up momentum as developers push for higher-density developments, which in turn mean cheaper rents.
The number of affordable apartments in the capital has risen by almost 20 per cent in the past decade, according a report from property research firm CBRE.
This is despite London still being the most unaffordable place to buy property in the country, with average prices of £1.25m ( €1.9m) for a three-bedroom apartment in London, according the report.
London is now the UK’s most unafforable place to rent a property, according CBRE’s analysis.
“There’s an increasing recognition of the affordability of renting in the city,” said Simon Wilson, director of CBRE London, which carried out the research.
“This is a trend we haven’t seen before, so we’ve been watching the whole housing market and the whole property market very closely.”
London’s housing market has been undergoing a transformation, with builders turning to high-rise apartments and apartment towers to make money.
The new buildings are designed to provide more living space, with many apartments being built with terraces.
In the past, many apartments were built in a flat style and were not designed to be shared.
“A lot of these new towers in London are designed for living, so it’s really about the living room,” said Laura McAlpine, managing director at CBRE Property London.
The average price for a flat in London in 2018 was £819,900.
London’s new apartment boom is seen as a major shift in the housing market, as more people have been moving into the capital and more people are looking to buy their own home.
“It’s the next stage of gentrification,” said Wilson.
“What we’re seeing now is a new wave of luxury housing in the region, so these new tower developments are really a continuation of that trend.”
The city’s new tower boom is not just a trend in London; developers are also starting to build new apartments in other cities, including Sydney and Auckland.
Some of these developments have a smaller footprint than the larger ones, but are cheaper.
“They’re cheaper,” said McAlperes.
“But it’s not just about how much space you can fit in the building, it’s how much you can charge per square metre, how much of the site you can control,” she said.
“You can do a lot more in a smaller building.”
A study by CBRE found that the number of apartments in New York City had jumped from 12,600 in 2008 to 30,400 in 2016.
London has a smaller population than New York, but it has seen a much more dramatic growth in the number and size of new apartment developments.
“The demand is there,” said John Smith, managing partner at CBRe Property London, adding that developers are now building a new generation of apartments for the city.
“In London, it has become more of a trend for people to live in smaller flats in an urban setting.”
With more developers turning to cheaper apartments, there is less competition to build them in the area.
It’s not the only area where apartment towers are taking off in London.
In 2019, the number for new apartment blocks in London rose from 9,000 to 20,000.
However, this is still far below the global average of 36,000 new apartment projects.
A CBRE study found that apartments in Dubai were more affordable than in New England, with prices of between £1m and £2m (US$1.8m to $2.3m).
“We see the trend in Dubai, where there’s a strong supply of units and we see a rising demand for apartments,” said Smith.
“That’s probably one of our main areas for growth in Dubai and that’s where it will be in the future.”
But not all apartment towers in the UAE are cheap.
In 2018, Dubai launched a new tower programme, which was designed to help new apartments become more affordable.
But this was criticised by developers, who argued that the government was over-regulating the market.
“We are very much a local market, and the government does a very good job of making sure that the market is really healthy,” said Jones, the development manager at DZ