The average rent paid for a residential property in the UK outside London hit £750 a month in December, rising by 2.04% over 2016, according to the latest Landbay. Rental payments now account for over half (53%) of the average take-home pay of £1425 for people living outside the capital.
London rents dipped to £1,882 in December, but take-home pay of £1,967 per month means those with average incomes will spend almost all their money on rent unless they split the cost.
Average rents across all property sizes grew by 2.13% in England (without London), 1.42% in Scotland and 1.43% in Wales in 2016, rising to £755, £721 and £634 respectively by the end of the year. Together, this means the average monthly rent paid for a property in the UK outside London has hit the milestone figure of £750.
Meanwhile, wage growth has failed to keep pace. Disposable income, the take-home pay individuals receive after tax and benefits are accounted for, fell across the UK by 2.3% in the first three quarters of 2016. Outside London (where average income is significantly lower than in the capital) disposable incomes are approximately £1,425 per month. This means that for an average-sized household with a sole earner, over half (53%) of their disposable income is spent on rent. If that individual lives in a one bed property, where rents are a more modest £592 per month, the proportion spent on rent falls to 42% of take-home pay.
Those living in the capital face an even narrower margin. Average rents in London remain more than double the average for the rest of the country at £1,882, despite dipping by 0.13% in December, with average disposable incomes at £1,967. For single-earner households, that means that the average monthly rent for a one-bed is 74% of take-home pay. Accordingly most London households must rely on multiple or high income earners.
With consumer inflation set to rise to 2.7% in 2017, house prices continuing to climb4 and low interest rates restricting the ability to save for a deposit, the findings raise fresh concerns about the affordability of the housing market for aspiring homeowners.
John Goodall, CEO and founder of Landbay said: “Outside the capital, rents continued to grow across the country in 2016, a trend we expect to continue into the coming year. Demand for rented accommodation will remain robust, as the myriad threats of rising house prices, falling real incomes and rising inflation affect the ability of aspiring homeowners to get their foot on the housing ladder and save for a deposit.
“The government may have just committed £7 billion to building an additional 200,000 affordable starter homes, but supply across all tenures is still too low. The buy to let market has become a ‘catch all’ for a forgotten generation of house hunters, for those who cannot, or choose not to, buy a property outright. All eyes will now be on the upcoming Housing White Paper, which may be the best opportunity we’ve had in recent years for significant change.”