Renting a home in Britain has become a necessity for many, in large part due to the difficulties that people face in getting started on the property ladder. Upfront deposits to secure property are at such a high level that many people are either forced to turn to their parents for financial aid or assistance, or are excluded from searching for a home of their own altogether.
However, there might be some good news for ‘Generation Rent’, as it’s become commonly known. Wage growth has finally overtaken the rate of rental growth across all areas of the country, according to the latest Landbay Rental Index. Given that your average UK tenant (excluding London) pays out about a third of their pre-tax monthly salary on rent, this is great news for those renters looking to save for that first big deposit.
There has been a stark decrease in the number of people buying their first home in their 20s during the last decade, from 37% to 27%, and the total percentage of British residents renting currently sits at around 20% as of 2017, up 10% from 20 years ago. With that in mind, this increase in wage growth could have an impact on the property market in terms of the number of renters who could become potential buyers.
The figures suggest that rental growth for every region of the country excluding the capital has increased by 1.25%, averaging out at an increase of &120 each year, but with monthly gross pay increasing by &768 per year, tenants could be better off by a tidy sum of &648.
This is dependent on where you currently reside, of course. Given that London rents can eat up as much as half of the average monthly wage, it’s no surprise that London, the South East, East and South West are the most costly areas of the country for proportion of wages spent on rent. Each of these regions sit above the 30% recommended threshold, with those in London renting a one-bedroom flat paying almost half of their average salary to their landlord.
At the opposite end of the spectrum, you’ll spend a far lower proportion of your wages on rent if you’re located in the North East, Yorkshire or North West, although the former has seen the lowest earnings growth of any British region.
“Improved affordability is welcome news for renters,” offered Landbay’s CEO, John Goodall. “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. 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.”