Landbay has reported that the average rent paid for a residential property in the UK (outside London) reached £750 last month.
They increase by 2.04% over 2016, according to Landbay’s latest Rental Index, powered by MIAC.
Rental payments now account for over half (53%) of the average take-home pay for people living outside the capital (£1,425).
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.
At the same time, 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.
Landbay said this means that for an average-sized household with a sole earner, 53% of their disposable income is spent on rent. If that individual lives in a one-bed property, where rents are £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. London’s property market is subject to higher exposure to international investment, which distorts the ratio, but Landbay says 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 20173, house prices continuing to climb 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 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.”