Londoners spend less than other Brits due to pricey housing
Londoners earn almost 40% more than the UK average, but spend 7% less after removing housing costs from the calculation
[LONDON] People living in London are left with less to spend on goods and services than average Brits because of the capital’s exorbitant rent and house prices, a new report showed.
Londoners earn almost 40 per cent more than the UK average, but spend 7 per cent less after removing housing costs from the calculation, according to an analysis of official data conducted by researchers from the Institute for Fiscal Studies (IFS) and the Economic Statistics Centre of Excellence.
“Our findings challenge the conventional wisdom that the typical London household enjoys higher living standards than their counterparts across the country,” said Gautam Vyas, research economist at the IFS.
The report illustrates the impact of high housing costs in the capital. Rent prices rose almost 10 per cent in the year to February, reaching a record at almost twice the national average.
The picture is particularly dire in certain parts of London. For example, despite being among the top 10 per cent highest earners in the UK, those living in Islington, a largely affluent area in the north of the city, rank in the bottom 5 per cent when it comes to household spending after housing costs.
Elevated mortgage costs, pay growth lagging rent inflation and high house prices make it harder for prospective homeowners to come up with a deposit in London. The average home in the capital costs the equivalent of 11 years of earnings, almost double the affordability threshold.
The IFS findings also reflect the fact that Londoners tend to save more than in other parts of the UK. People often live in the capital to enjoy relatively higher earnings, which enables them to set more money aside, the authors said. Many then move away later in life as their incomes fall, for example when they retire, choosing to rely on savings to maintain the same living standards.
Even when accounting for housing costs, London ranks below the rest of the South East, South West and the East of England for household consumption, and is just 2 per cent above the overall average. BLOOMBERG
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