Renting a home is becoming more expensive in the UK outside of London as rent paid rises and pay falls, the latest letting index suggests.
The average rent paid for a residential property outside the capital city was £750 in December and increased by 2.04% over 2016, according to the Landbay rental index.
The index report says that rental payments now account for over half, some 53%, of the average take home pay for people living outside of London. In London average rents remain more than double the average for the rest of the country at £1,882, despite dipping by 0.13% in December.
A breakdown of the figures show that average rents across all property sizes excluding London grew by 2.13% in England, 1.42% in Scotland and 1.43% in Wales in 2016, rising to £755, £721 and £634 respectively by the end of the year.
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 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.
In London where average disposable incomes are £1,967, in a single earner households the average monthly rent for a one bedroom home is 74% of take home pay. Accordingly most London households must rely on multiple or high income earners.
The report points out that London’s property market is subject to higher exposure to international investment, which distorts the ratio, but this nevertheless highlights the pressure for households in London to have multiple income streams to cover rental payments.
With consumer inflation set to rise to 2.7% in 2017, house prices continuing to climb and low interest rates restricting the ability to save for a deposit, the report says that the findings raise fresh concerns about the affordability of the housing market for aspiring home owners.
"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," said John Goodall, chief executive officer of Landbay.
"The government may have just committed £7bn 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," he added.
