Housing and Planning

Eurostat: UK rental markets among the most expensive in Europe


Economic Theory
Eurostat have just published the latest edition of their annual Current Market Rents report, which is a comparison of rent levels across major cities in Europe (and beyond). It doesn’t contain anything novel or surprising, but since there are still a few housing crisis deniers left in Britain, I thought it would make sense to pick out some of the report’s findings.

Firstly, a note on the report’s methodology. Eurostat try to compare like with like. They do this by selecting rental properties of a broadly similar standard, in neighbourhoods that are broadly similar in terms of their amenity levels. The kind of neighbourhood they are interested in could be described as “well-to-do but not absurdly posh”. for example, their London index includes Islington and South Kensington, but not Mayfair or Chelsea. It is not meant to be representative of the city as a whole: it is, by design, a biased index. But it still suitable for comparing rent levels across cities, because it displays the same bias everywhere, so the biases should cancel each other out.

In other words, it’s not especially suitable if we are interested in absolute rent levels, but very much so if we are interested in relative ones.

It shows, once again, that London is the most expensive city in Europe: London is more than twice as expensive as, for example, Munich, Helsinki, Madrid, Lisbon, Berlin, The Hague, Prague, Vienna, or Rome.

“So what?”, I hear you say. “London isn’t Britain. Why does everyone think they have to live in London? Just move out, if you can’t afford it! There. Problem solved.”

I have never found this argument terribly persuasive. London is, for better or worse, the most prosperous and productive part of the country, so it is not some fanciful indulgence if people want to move there: it is a perfectly reasonable response to the country’s economic geography.

But let’s forget London. The report also contains data for Reading, which, while still, in the widest sense, part of the London orbit, is much closer to a “normal” British city (although the report is not meant to be about “normal” cities). And indeed, as we move from London to Reading, rent levels drop by almost half. However, Reading is still more expensive than Oslo, Bern, Munich, Helsinki, Madrid, Lisbon, Berlin, The Hague, Prague, Vienna, or Rome, and not a million miles behind Paris. UK properties, both in London and Reading, are also at the lower end of the list in terms of space, so if these rent levels were expressed in per-m2 terms, the UK would appear even more expensive still.

The UK, in other words, may well be the most expensive country in Europe in terms of rent levels.

It is possible that a more representative study, which looked at, say, a dozen cities across each country rather than just two, would come to a different conclusion. But even if that were the case (and it may not be), that would still not mean that there is no problem here. Even if the affordability problems in the UK’s rental markets were heavily concentrated in specific regions, rather than being nationwide problems, that would still be a huge constraint if the affected regions are also the most productive parts of the country. It would mean that people could only avoid those affordability problems by avoiding the country’s most productive regions, thereby depriving themselves, and the country as a whole, of economic opportunities.

Britain’s housing crisis is not just a problem for those who find themselves at the sharp end of it. It has also become a serious drag on the country’s overall prosperity. By allowing this problem to fester, we are needlessly making ourselves poorer.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

3 thoughts on “Eurostat: UK rental markets among the most expensive in Europe”

  1. Posted 10/01/2024 at 05:43 | Permalink

    London is the greatest city on earth, hence the premium if you want to live there. Same for England.

  2. Posted 10/01/2024 at 12:08 | Permalink

    London is a World City, thus the only really appropriate comparison for it is not with places like Paris or Berlin, but with the only other World City. That being New York City.

    Reading is still too close to London’s orbit to be a proper comparison as to the rental market – over 5/6 of the population don’t live in the London megalopolis. I’d be interested in seeing how cities like Birmingham, Leeds, and Manchester compare for a more balanced picture.

    Loosening the stupidly rigid planning controls would help enormously, but the Tories blew it. At least London has yet to fall victim to the curse of rent control, despite its Mayor’s reaching in that direction. That would make things far worse…

  3. Posted 10/01/2024 at 16:50 | Permalink

    Look at the levels of immigration over a 10 and 20 year period and the explanation begins to emerge. Also, it is well known that the space available to UK property owners and tenants is far below Continental European standards. Maybe the population density per hectare is something to do with that.

    If Eurostat (why use data from an EU sponsored outfit?) compared similar sized flats of course the UK would be more expensive.

    Having raised thos objections to the report I do, intuitively, agree with the overallview. Part of the problem is local planning authorities which have a fixed idea of what their district should be like and reject applications that challenge that. Look how Redbridge had to be prevented from building Barratt houses on a sports ground but refused, =until pushed, to agree to blocks of flats near the stations.

    I suppose we will soon get yet another report from IEA saying we have to build on the Metropolitan Green belt despite the low level of development density in the GLA compared with (say) Paris, the huge number of undeveloped sites with planning approval and the health and environmental benefits of the Green Belt. I guess developers would prefer to build on virgin land than on brown field, fifficult shaped sites and so on.

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