Average UK rents rose twice as fast as wages in 2015 as the housing shortage continues to bite, new data shows.
According to the monthly Landbay index, average UK rents climbed 3.8% last year, twice as fast as wages which grew 1.9%. Despite a slight seasonal dip of -0.2% in November, average monthly rents ended the year at £1,286.
John Goodall, co-founder and CEO of Landbay, said the acceleration of rents ahead of pay suggested there was a severe shortage of properties.
“Rents often track wages as consumers with more pay compete for the most desirable rental properties, but the fact that rents are outpacing wages is a clear sign of the shortage in properties to rent as large parts of the UK face an acute housing shortage,” said Goodall.
Rental increases outpaced wages in all parts of the UK except the North East and North West.
Stagnant wage growth of 0.1% in the east of England combined with rapid rent rises meant that rental growth outpaced wage growth by over 5 percentage points.
Three bedroom properties recorded the biggest increase, up 5.2% to £1,484 for the year, suggesting that family homes and properties for sharers are in highest demand.
Priced out of London
Average rents in the capital went up 4% in 2015 to £2,047, with boroughs outsides zones 1 and 2 experiencing an acceleration in prices as more Londoners look for somewhere more affordable.
Commuter hotspots around London saw some of the biggest rises, a sign that many working in the capital are priced out of living there.
Luton (11.1%), Medway (8.8%) and Thurrock (7.3%) all featured in the top five for rent price increases during 2015. Counties to the north, east and south of London showed higher than average increases in rent prices during 2015, evidence of a ripple effect in southern parts of England.
“Despite a small seasonal dip towards the end of the year, London rents rose significantly ahead of wages in 2015. Rents often track wages as consumers with more pay compete for the most desirable rental properties, but the fact that rents in London are outpacing wages is a clear sign of the shortage in properties to rent as the capital faces an acute housing crisis,” Goodall said.
“Based on its recent policy changes for the private rental sector such as the new stamp duty surcharge and changes to tax relief on mortgage interest, the government seems intent on weeding out amateurs from the ranks of new buy-to-let investors. If it is successful, our rental index suggests that the result could well be higher rental income for the professional investors who are not affected,” he added.
