Renting a home in the UK becomes more affordable as wage growth outstrips rent growth
Tenants in the UK spend a third of their pay on rent but wage growth is outstripping rental growth in all regions, the latest rental index shows
Tenants in the UK spend a third of their pay on rent but wage growth is outstripping rental growth in all regions, the latest rental index shows.
It means that wage growth is improving affordability for renters in all regions with tenants, excluding London, earning a typical monthly salary of £2,317 before tax, and paying rent of £769, according to the Landbay index.
However, tenants in London are paying the highest proportion of their earnings at 61% on rent while those in the North East are paying the lowest amount of their salary on rent at 25%.
The index data also shows that year on year rents have increased by 1.2%, excluding London, meaning tenants are paying £120 per year more. However, monthly gross pay has improved by £768 per year, leaving tenants £648 better off.
A breakdown of the figures shows that regions with tenants with higher than average rent as a proportion of their pay are the South East and East England, which pay 42% and 38% respectively of their gross salary on rent.
Regions with lowest proportion of money being spent on rent include the North East at 25%, Yorkshire and Humberside at 26% and the North West at 27%. Despite this the North East has also seen the lowest earnings growth and with rental growth largely remaining unchanged during the year at 0.04%, tenants are only £132 better off a year.
When it comes to average rents, overall they increased by 1.03% in the UK year on year and by 0.08% month on month to £1,212. Excluding London rents increased by 1.25% year on year and 0.09% month on month to £769.
In England rents increased by 0.99% year on year and by 0.07% month on month to an average of £1,243, but when London is excluded they increased by 1.2% year on year and 0.08% month on month to £774.
In Scotland average rents increased by 1.54% year on year and by 0.14% month on month to £742, in Wales they increased by 1.71% year on year and 0.14% month on month to £655 and in Northern Ireland they increased by 1.01% year on year and by 0.13% month on month to £574.
CEO and founder of Landbay, John Goodall said improved affordability is welcome news for renters. For tenants looking to save up for a house, the prospect of having more money in their pocket each month will help them get one step closer to owning their own home.
He said wage growth is continuing to improve across the UK so the outlook for tenants can only get better. Brokers can use this data to help clients to look for opportunities across the UK where higher wage growth will boost demand for properties.