For the first time ever, monthly rent in London exceeds £1,000.

The price of renting a room in London has topped £1,000 ($1,246) a month for the first time, highlighting a lack of rental property that is adding to the UK economy's problems.

According to data gathered by SpareRoom, a service that connects individuals looking for roommates, the average monthly rent for a single room in the capital increased to £1,013 in August from £910 a year earlier. That is 28% more than the national average of £794 and double the rate of inflation.

The pandemic's rising housing costs and the highest mortgage rates in 15 years have made it increasingly difficult for landlords to rent out their houses, leading many of them to sell. The longer first-time buyers are stuck in the rental market due to the higher borrowing rates, which also makes it harder for them to climb the housing ladder.

As stated by Matt Hutchinson, a director of SpareRoom, "The money people make from being a landlord isn't what it was 10 or 15 years ago, and people are looking to recoup those costs in some way." "Their mortgages are being impacted by the sharp increase in interest rates. With numerous tax reforms, however, the margins for being a landlord have also shrunk.

Bank of England Governor Andrew Bailey expressed worry about the effects that rising rates are having on the rental market and acknowledged that those in the "lower household income bracket" were most negatively impacted. However, he said that rate rises were required to stop inflation.

The data for London show the severity of the rental market problem, which is limiting businesses' capacity to employ workers in the city.

According to SpareRoom, there are many more individuals looking for rooms in London than there are available. The figure for August was 20,000 more than it was for the same month in 2019, but there are now 10,000 fewer rooms available.

This implies that each room that is now available on the platform has 5.7 individuals actively looking at it, down from a peak of 8.8 last September but still treble the pre-pandemic average.

As a strategy to increase revenue, some property owners are turning apartments into short-term rental units that are advertised through websites like Airbnb Inc.

More landlords are turning to short-term rentals as a result of increased regulation and a reduction in the tax credit formerly offered on mortgage payments. These come at the price of tenant leases that are longer in duration.

Based on statistics gathered by Inside Airbnb, the number of properties in London that were advertised on Airbnb increased by 10% in the second quarter compared to the prior quarter.

In line with Bloomberg Economics, first-time buyers are being affected the hardest by rising rates as mortgage payments now make up more than 40% of take-home income, compared to the long-term average of approximately 29%. Young people find it challenging to leave rental housing and move into their own houses as a result.

(Sources: bloomberg.com, spareroom.co.uk)