London has overtaken Hong Kong as the most expensive city in the world for workers to live and for companies to place staff, a new study has found. Soaring rents combined with the strong pound has driven up the average cost per employee of renting somewhere to live and leasing office space by 39 per cent to $120,000 or £73,000 a year, according to Savills estate agents’
‘Live/Work index’ – making it almost twice as pricey as Sydney, and four times more than Rio de Janeiro. Property prices in the UK capital have soared 18.4 per cent in the past year alone, encouraged by a general upturn in the economy, and that helped take London from fifth place in 2008 in the study’s table to top.
Soaring costs: London has overtaken Hong Kong as the most expensive city in the world to live and accommodate staff, according to the 12 Cities report from estate agent Savills
It places London well ahead of other cities on the list, such as New York and Paris (third and four respectively), which along with Hong Kong are the only hubs where residential and office space rental costs top US$100,000, or £61,000 a year.
This is still well below the record set by Hong Kong in 2011 of $128,000 a year – around £79,000 – Savills said, adding that residential property prices in Hong Kong remained 40 per cent higher than in London, although the gap was beginning to narrow. However, the report warned that soaring property prices could have a detrimental effect on London’s future economic growth.
It said: ‘The availability of low-cost office space in and around Silicon roundabout, coupled with affordable residential accommodation, helped put the capital on the technology map.
‘But gentrification has priced out new start-ups, and the vitality of central London locations are at risk as they become too expensive for the types of occupiers that made them attractive in the first place.’
Meanwhile, Savills said Hong Kong’s drop to second spot in the rankings, after five years at the top, was down to a modest fall in residential rents combined with a weakening currency. At the other end of the scale, Rio de Janeiro and Mumbai are the cheapest cities on the list to locate employees.
Yolande Barnes, the company’s director of world research, said: ‘This year has seen much more modest real estate price growth in nearly all our world cities, and some have shown small falls.
‘We expect this subdued trend to continue as investor interest and market activity shifts to second-tier cities.
Stay the night: When it came to average luxury hotel rates, London was knocked off the top spot by Paris and was closely followed by Dubai
‘This lower level of price growth means that currency fluctuations have produced some of the biggest changes in our rankings, which are expressed in dollar terms.’For multinationals looking at their local costs, it is this which is likely to exercise them more than property markets over the next year.’
The study also found that London also came second for highest luxury hotel prices – first spot went to Paris where average prices topped $800.The CBI earlier this month estimated that housing shortages were costing consumers £4billion a year due to the impact of above-inflation house price rises. The business lobby group said that tackling the UK’s ‘chronic’ housing shortage should be near the top of every party’s agenda in the run-up to next year’s general election.
It called on politicians to take bold decisions ranging from building on low-quality green belt land to overhauling stamp duty in order to help meet the 240,000 new homes it believes need to be built every year.
