Is London Really The Most Expensive City To Live In?

By Londonist Last edited 21 months ago
Is London Really The Most Expensive City To Live In?
We know it's expensive here, but things haven't quite got this bad. Have they? Photo by Misty from the Londonist Flickr pool.


A report which rates London as the most expensive city to live or work in — even topping notoriously pricey spots like Hong Kong, New York and Tokyo — came as no surprise to anyone in the city. Average rent for a two bedroom property in Greater London now stands at £2,216, compared to £677 in the rest of Britain. Office rents are spiralling too, with one city office building being let out for £90 per square foot in April.

The report, published by Savills research, looks at the cost of renting residential and commercial space but doesn’t consider expenses like food or transport, and helps to explain London grabbing the top spot. Is London really the most expensive city to live in once other factors are taken into account, or do Londoners have it easy compared to residents of other major cities?

Rising rents

Rent is what is pushing London to the top of the Savills chart. Although its index is focused around commercial lets, private rents are taken into account too, as the higher they get the more pressure employers are under to increase salaries to compensate, or even to attract workers in the first place.

For businesses this creates a double-edged sword. As Yolande Barnes, director of world research at Savills says, being the most expensive city isn’t necessarily a desirable situation, but it reflects the desirability of London as a place to live and work.

However, this upward trend in rents could eventually impact on London’s competitiveness as a business base compared to other major cities. Barnes says: “As an occupier looking to rent in the city, it makes London less attractive compared with other cities employers might look at”.

But despite a 19.4% increase in residential rents since 2008, Londoners are still seeing lower rises than those living in other major cities. Rents in Sydney grew by over 33% in the same period, buoyed by investor speculation, demand for city centre apartments and strong performance in the economy as a whole.

Rio de Janeiro outstrips even Sydney, with a 116% rise in the cost of residential rents, driven by growing middle classes and employment, expanding credit markets and foreign investment.

Comparing the cost of shopping

Headline inflation rates rose by 1.9% last summer, and the cost of food was a major factor behind this rise. But even with this rise, Londoners don’t face the biggest bills for their grocery shopping. Comparing the cost of a basket of staple foods between the most expensive cities according to the Savills index, London doesn’t even make the top five, being crowded out by Sydney, Hong Kong and Tokyo.

Sydney’s expensive shopping basket is a reflection of steep prices throughout the country, due to transport costs, historically high prices and Australia’s generous wages.

The position of Tokyo and Shanghai in top positions reflects data from The Economist Intelligence Unit (EIU), where groceries tend to be most costly in big Asian cities.

Meanwhile London shoppers feeling the inflationary pinch can take advantage of the current supermarket price wars, which are seeing Aldi and Lidl aggressively competing on cost to draw customers away from mid-market stores.

But on one London doesn’t even make the top 10

You’re not reading that wrong. According to the EIU London only ranks at number 13 in the world’s most expensive cities to live in. These figures are based on a more general estimate of living costs, including transport, utilities and food in addition to rents, and are based on prices in US dollars.

In these figures London is outstripped by Singapore. High transport costs (whether for running a car or public transit), dependence on other countries for utilities and strong currency appreciation against the dollar all contribute to pushing it into first place.

However, this is not necessarily all that it seems. The Singaporean government argues that the EIU food basket is far from representative of the type of groceries most Singapore residents buy, including expensive luxuries like filet mignon and imported papers. This is borne out by the fact that according to resident-reported prices, a shopping basket of staples is £21.96, just under the cost in London.

One of the issues with the EIU data is that so much is covered that the particular price points which make Londoners wince on a daily basis get evened out. Take transport for instance. A five-mile Tube or bus trip in London is more expensive than in Hong Kong, New York or Paris — and this is by a factor of 13 between London and Hong Kong.

For most Londoners, travel by public transit isn’t an avoidable expense, unlike some of the factors in the EIU survey, such as domestic help or a bottle of wine.

London might not be the most expensive city for everything — spare a thought for residents of Sydney and Hong Kong — but the combination of rapidly rising rents and high transit costs, along with stagnating wages and inflation, certainly means that Londoners' concerns about the financial and social sustainability of living costs in the capital are far from unfounded.

By Elizabeth Grey

See also: Is it possible to live in London on low income with no benefits?

Last Updated 28 October 2015

Andrea Casalotti

"For most Londoners, travel by public transit
isn’t an avoidable expense,"
Wrong. The majority of Londoners work within 8km from where they live, a trip easily made by bicycle.

Clunking Fist

And bollocks about expensive, it's still one of the most awesome cities to live in. Put a value on that, then.

cjcjc

19% over 7 years = 2.5% per year, more or less in line with average inflation.
Where are all those "grasping" landlords?!

peter

I lived in Melbourne up until 2013 and London from 2013-15. No way is Melbourne more expensive as this report suggests.

Rents are around double to three times in London for worse accommodation.

Public transport is literally thousands of pounds a year to commute from somewhere 19 miles away like St Albans. The equivalent distance in Melbourne (say Frankston) would be much less than half that.

Supermarket workers get paid peanuts in London (around £7). In Melbourne I used to earn $23.p/h at Coles, the equivalent of a Sainsburys or Tesco - and $30 on Sundays.

Club entry is more expensive in London, around x1.5 to double.

There are so many more taxes - watching TV, paying councils, national insurance etc.

Grad salaries are lower in London than Melbourne despite expenses being higher

Fix

London is not the most expensive city in the world. Sure, when you take into consideration of currency of course its very expensive. GBP is 1.25 times stronger then USD and at point was 1.5 times stronger than USD. GBP is almost twice as strong as Singapore and Australian dollar, so of course it is more expensive. But if you look at wages to cost of living statistics, it is not really that expensive. I can guarantee you properties in Hong Kong, New York and San Francisco is way2 more expensive.

Fix

I dont think Tokyo is really as expensive as people always said. It used to be extremely expensive, but after 20 years of deflation it has been pretty cheap. The cost of shopping though, is expensive. However, rental and public transport are way more affordable than London or New York.