It isn’t necessarily the costliest in every department though, as Zurich, Switzerland has become even costlier than London in recent months. That being said, London still is a very expensive place to live in and in some respects, the city can even be considered as being the most expensive in Europe as well. When you look at the various aspects of London dwellers’ average financial records and the current stats, the reasons behind the city being so expensive become much clearer.
Back in January 2018, The Telegraph confirmed that the average rent in the prime locations came to about £5,398/month for a flat in London with three bedrooms. Not only was this significantly more expensive than even Paris, where the same could be rented for £2,747/month on average, it was multiple times more expensive than even the average rent costs in other cities in the United Kingdom, where a similar three-bedroom flat would cost £1,427/month on an average. It is to be noted that the average cost of rent in the major cities of UK (excluding London) is even lower than the average rent of similar properties in all of Europe, which was £1,705/month. What can be seen from these reports is that the cost of rent in London is not just excessive in comparison to the rest of Europe, but the rent rates are significantly higher than even the rest of UK as well. Cheaper accommodation is, of course, available in London, but as far as the rent associated with living in the best locations in London is concerned, they are sky-high.
Londoners Take Frequent Loans
According to Cash Lady, the average short-term loan amount requested in the month of July was £376 in London and the second most common reason cited for taking the loans was bill payment. The page can be checked out for more loan related details on London and all the other major cities in the UK. This is clearly an indication of how expensive the city can be to live in, especially if you consider that there were 2,368 short-term loan applications from London in July alone, vs. 1,167 short-term loan applications from Birmingham in July, which was the second highest on the list last month, and for a lower average loan request of £340.
There is no doubt that with an average living cost of more than £11,000 (€12,450.49) on the very first term for students coming in to study from abroad, London is the most expensive city for education in all of Europe. Even Zurich (€10,623.86) came second in this competition and the margin was quite significant.
Supply and Demand
The thing about London is that almost everything is more expensive than it actually should be; a fact that becomes even more clear once you compare the costs to all the other cities in the UK, including the prime ones. This is largely due to the inflated rent rates in the capital, but that leads us to the next question, why is the rent so high here? In fact, one of the main reasons as to why hotels and restaurants in London charge so much more is because they have to pay higher commercial rents too, which has a knock-on effect on what they charge their customers. The answer is not simple, but multifaceted really. Nevertheless, a lack of availability of properties, in relation to high demand in the city for accommodation, is the prime reason for the hike in prices. In other words, there are more residents and businesses trying to find a place for themselves in the heart of London than there is space for. One of the theories suggests that too much capital has flooded into the city after the financial crash of 2008 and the inflation of prices in London is a direct result of that.
It is a Vicious Cycle
When maintaining a roof overhead becomes more challenging than it should be, it is only natural for everything else to become more expensive as a consequence of that as well. All businesses charge more for everything in London because of the same reason and employees won’t work for a lower average salary anymore because they need to pay rent too. It is a vicious cycle and it is one that would be a challenge for London to eliminate. That being said, rents did come down by 0.2% in June this year and that had not happened since the year 2012. Many experts are of the opinion that this fall in rent inflation is a natural progression of the slowdown in the inflating rent rates, which started in 2014. London is in the midst of a property bubble and sooner or later that bubble will burst.
London is one of the most expensive cities in Europe and even the world because of multiple factors such as high demand for property, high sales tax, expensive rent and ownership costs, etc. are all at play here. In addition to these factors, there is also the question of high-income potentials in London as well. After all, the average weekly wage in London, as of March 2018 was £727, which is the highest in all of the UK by a long stretch. As a result of that, even the exuberant price for a cup of coffee at a local café is tolerated and paid by the average Londoner, without too much complaint. The inflation has made moving to the city particularly tough for people from outside it though, and they often need a number of short-term and long-term loans to just get themselves started in London.