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Wage Increases Set to Overtake Rent Rises

April 19, 2014 | Landlord News  

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For the first time since April 2010, rental rises will be outpaced by average wage growth this year, according to a report by LSL Property Services. Average rent rises of 1.7% will be beaten by an average earnings growth of 2.2%.

The gap has been closing since 2012, when rental growth doubled wage growth. It is possible that the point where wages finally overtake rent could happen this month, but the report notes that it is more likely to happen in July.

David Brown, commercial director of LSL, said, “The last time rents were rising more slowly than wages was four years ago and that was only due to a rapid dip in rents following the collapse of purchase prices.

“Today we are in a very different situation. The private rented sector is now powered by waves of investment from landlords and a rejuvenated financial system. Meanwhile every sector of the economy, including construction, appears to be creating jobs.”

According to the figures, the typical monthly rent with one individual earner per household represents 38.2% of earnings, as of January 2014. It is expected to reach a peak of 38.3%, then decline steadily until at least 2016.

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