London is ranked 8th most expensive global city
London Property: Rising Costs Amid Lower Yields
Soaring rents, inflation, and the cost-of-living crisis have driven London up the rankings as one of the most expensive cities to live and work in.
According to the latest global cost-of-living index, London now ranks eighth, just behind New York, and one spot higher than last year. This surge highlights the ongoing financial challenges for those investing in London property, particularly when considering that the yields compared to outlay are generally worse in London than elsewhere in the UK.
Potential investors may find more lucrative opportunities in other parts of the UK where property prices and rental yields often offer better returns.
Global and Local Comparisons
Hong Kong remains the most expensive city for expats and global workers, followed by Singapore in second place. Switzerland holds the next three positions, with Zurich, Geneva, and Basel occupying the third, fourth, and fifth spots. Copenhagen is the only other European city in the top 20, while Paris and Berlin are ranked 29th and 31st, respectively.
UK cities outside of London fare much better in the cost-of-living index. Edinburgh has dropped to 53rd from last year’s 33rd position, Glasgow is at 68th, Birmingham at 78th, and Aberdeen has fallen to 82nd from 37th. These cities present more attractive options for property investors seeking better yields and lower initial investments.
Housing Costs and Rental Volatility
The cost of housing significantly impacts the cost-of-living rankings. Between 2023 and 2024, there was notable volatility in housing rental prices worldwide, with significant variations between cities. A key factor driving the cost of housing is the supply shortage relative to demand, particularly in global cities like London. This mismatch is pushing prices up, making it increasingly challenging for investors to achieve favorable returns.
The index revealed that average rents in London increased by 4%, New York by 7%, and Dubai by a staggering 21%. These rising costs are putting additional pressure on businesses, which must consider these expenses when relocating staff.
Investing in London Property: A Cautious Approach
While London remains a prime location for property investments due to its global appeal and economic significance, the lower yields and higher outlays compared to other UK cities necessitate a cautious approach. Investors should carefully weigh the potential for capital gains against the relatively higher costs and lower rental yields in London. In contrast, cities like Birmingham, Glasgow, and Edinburgh offer more favorable conditions for property investment, with lower purchase prices and higher rental yields.
Final Thoughts
As London climbs to the eighth spot in the global cost-of-living index, it underscores the challenges of investing in London property amid rising costs and lower yields. Property investors may find more promising opportunities elsewhere in the UK, where the potential for gains is greater. Balancing the prestige of owning property in London with the practical considerations of yield and outlay is crucial for making informed investment decisions.
At RPGCC we have a property accounting experts who regularly help landlords, property syndicates, and property portfolio owners ensure their affairs are both compliant and their tax position is optimised. If you would like to speak to a member of our property team please contact us on 020 7870 9050. We are only a call away.
