The latest Rental Index by Landbay, the lending platform for residential buy-to-let mortgages, is now available, and the included statistics are showing that rental payments in the UK now account for 52% of the average disposable income for people living and working outside of London.
The average disposable income is said to currently be at £1,471, with the average rent paid for a residential property in the UK (excluding London) at £761 a month in March, showing an annual growth of 1.21%.
It will probably come as no surprise that within the UK’s capital city, the financial situation for renters is even tighter. We are still seeing rent prices in London almost double those in the rest of the country. Despite rental growth only recently returning to a positive state, London renters are looking at an average of £1,879.
In comparison, the average disposable income in London is at £2,108. For those independently supporting their household financially, this means that 89% of their take-home pay is going directly towards paying their rent.
Such a situation could make living alone in London a financial squeeze, but for multiple earners, or those on a higher-income, it is of course more feasible.
Living with such a tight budget can often leave renters juggling their priorities, with paying their rent often coming lower down the list. If you are worried about the risk of rent default by your tenants, then for peace of mind it is worth considering Rent Guarantee Insurance. Check out our website for more information on the Rent Guarantee Insurance we can provide you at Just Landlords.
Those with occupations basing them within London do have the option of living further afield and commuting. This could save money, and is even more plausible with the current state of public transport connecting surrounding areas to the boroughs of London.
At the very least, they would see a dramatic cut in the amount of disposable income going towards their rent. For example, looking at the South East we are seeing an average rent of £1,053, which is 58% of the average disposable income for those in the region, currently at £1,817. Moving up the country, those who live in the East of England are spending 55% of their take-home pay on rent.
Moving further away from London sees even more of a drop in rent prices, with those in the North East spending just 41% of their average disposable income of £1,350 on the rental of their homes. If you are looking to increase your savings, and your occupation allows for it, would you consider relocating for such a financial change?
John Goodall, CEO and founder of Landbay has commented: “Rents have continued to rise over the last five years, increasing by 9% across the UK since March 2013 and by 7% in London – with monthly payments remaining a burden on those struggling to save. Tenants saving up for a house face a triple challenge with more and more of their income spent on rent, partnered with trying to catch up with the pace of house price inflation and record low interest rates limiting their ability to save money.
“There has been much speculation about the long-term future of the buy to let sector from an investment perspective, however, demand remains strong as brokers would attest. Not a day goes by when there isn’t more news about the supply-demand mismatch in the UK housing sector and until this is resolved, tenants will continue to rely on the private rented sector to support them. With the right property and the right location, there are attractive yields to be had, and consistent rental demand will drive returns in the long-term.”