The cost of renting a property in Hackney soared by more than 25% in 2011 according to The figures run from June 2010 to June 2011 and use the rental asking price of properties advertised on its website.

This surge could lead to a shift from home ownership to private tenants in some areas of Hackney.

Samantha Baden, an analyst at and a recent home-buyer in Dalston, said: “Anecdotally we hear that there’s a large increase in the number of buy-to-let investors in Dalston due to the rising number of young professionals moving into the area.”

This puts home buyers head-to-head with investors who tend to have more resources at their disposal and can pay higher prices for properties if higher rents will cover the cost.

At the same time many of Hackney’s existing home owners sit on fat profits after years of property price rises. They too increasingly see their properties as investments.

Baden said the home-versus-investment debate over properties was “different for everyone” and outlined her attitude to the property she has bought in Dalston: “It’s a very small one-bedroom flat and while I love it now and consider it home, I did buy it with one eye on the future. I feel confident that my flat will be a solid buy-to-let investment when I decide to move up the property ladder.”

The question is whether’s figure means there is a rent bubble or if we should expect a long-term rise in rents?

Last year Jules Pipe, Mayor of Hackney, said he thought that high property prices would dissuade investors: “The impact of rising property prices in Hackney (means) the market has become very expensive for first-time buyers. This would suggest that the driving factor for today’s incomers is the desire to live in the borough, rather than seeking investment opportunities.”

But investors are now likely to find the borough more attractive. Even the threat of financial disaster in the eurozone has not dented buy-to-let landlord optimism. In August a survey by the National Landlords Association found that confidence in the rental market was at four-year high, despite the majority having a negative view of the economy.

Closer to home, the borough’s rising rents makes house prices more acceptable to buy-to-let landlords. In addition there is room for further rises. The average rent paid for a property in Hackney (£1,930) remains below the London average (£1,979 per month) with many parts remaining cheap despite increasing popularity. said the average rent in Dalston was £1,580 and £1,427 in Stoke Newington. In Clapton its even less at £1,373.  But last month Remy Zentar, owner of the L’Epicerie deli in Chatsworth Road, Clapton, told the Citizen: “I employ 15 people, all of whom live locally, and for them rent rises are a big problem.” He pinned the blame on buy-to-let investors.

But whatever is driving the rents, businesses like Zentar’s will eventually bear the brunt, according to Andrew Jones, director of the Local Economic Policy Unit at South Bank University. He said that employers will have to compensate employees, either for travel or for rent: “If people are being forced out then eventually that’s going to impact on employers wages – they will have to pay more.”

But Jones, who co-authored a report on an eight-year-long £124 million regeneration programme in Hackney, said his main concern was “the impact on people claiming housing allowance”.

He said that government policy on social housing had shifted and it was now seen as ‘an emergency safety net’ for residents. Those outside it are at the mercy of market forces and already face government-imposed caps on housing benefits that could, according to Jones, “drive poor people out of the borough”.

However, Hackney Council said that while 169 families in the borough face an average £145 per week shortfall on their rents due to the new £400 cap, the situation may not be as gloomy as commentators like Jones expect.

A spokeswoman pointed to the effects of a £550 cap imposed on housing allowance in 2009 which threatened 32 families in Hackney, some by as much as £300 per week. The council said it “received no enquiries from these families and none were evicted or re-housed. It appears that the landlords of these properties reduced the rents accordingly.”

So the most pressure will be on low earners who don’t own properties and who fall outside the housing benefits safety net. Many of these will be people who work in local businesses as well as artists.