London tenants have to dig deeper in to their pockets to pay their rents as the cost of letting property in the capital continues to soar.

Average rents in London spiked to a new peak of £1,202 a month in August, according to the latest figures from tenant referencing firm Homelet – up from £1,154 in July.

The increase of more than 12 per cent comes against a backdrop of financial concerns about jobs and bills.

Homelet suggests the boost in rents is fuelled by young tenants who cannot raise the funds to buy a home due to the squeeze on mortgages and rising property prices in the capital.

While rents surged, wages nudged up a more modest 2.4 per cent in the same period.

John Boyle, managing director of HomeLet, said: “Tenants in London are stretching their budgets more than ever, not only due to an increase in rental costs, but also rising energy costs following the announcement by utility companies that gas and electricity prices are set to soar even higher.

“This isn’t a good sign for some tenants who may struggle as winter approaches and the cost of running a home increases even more.

“Despite increasing rents due to high demand, the private rented sector is still offering a stable alternative to home ownership. Whilst many tenants are still renting because they can’t afford to buy, an increasing number of tenants are choosing to rent for the long term because of the flexibility that that it offers.”

The Homelet study also reveals the average term of a tenancy in London has shortened from 27 months to 22 months during the past two years.

“The decrease in tenancy lengths would indicate that tenants are starting to move more frequently again. And we can expect tenancy lengths to decrease in 2012, as the level of high value short term rentals increases in 2012 during the Olympic Games, which is positive news for letting agents,” said Boyle.

Tags | buy to let, rents