The worst areas where rental growth is swallowing up salary

September 6, 2019

Research by lettings platform Bunk – a modern agency saving landlords thousands of pounds with their innovative technology – has revealed where in the UK tenants are being squeezed when it comes to the affordability of rent and the amount of salary spent covering it.

Bunk looked at the current average annual rental cost of each area and what percentage of the average salary this accounts for, before looking at where has seen the largest increase in rent as a percentage of salary over the last year.

The research shows that across the UK rents have increased from an annual cost of £7,871 in 2017 to £8,110 last year. With the average salary in 2017 hitting £26,713, rent accounted for 29.5% of a tenant’s salary but with this increasing to £27,431, there has been a marginal increase of just 0.1% in rent to salary ratio.

However, this isn’t the case everywhere across the UK and while England, Wales and Northern Ireland have seen a drop in rent as a percentage of salary, this ratio has increased by 1.28% in Scotland.

The worst in the UK?

The City of London, where the average rent as a percentage of salary has increased from 35.9% to 48.2% in the space of a year – a 12.3% increase! This is down to an increase in rents but also a notable drop in the average salary which will no doubt sting for London’s high-end tenants.

Richmond ranks as the second-worst area of the UK, for rental affordability that is, with the rent to salary ratio increasing from 31.9% to 41.3% in a year, a jump of 9.4%.

Hackney follows as the third-worst in the UK and London for the squeeze on rental affordability, with rent as a percentage of wage increasing 8.9% in a year. No doubt partly due to an influx of wealthy hipsters and craft beer distilleries.

But the issue isn’t confined to London, with tenants in Rutland now paying 35.1% of their rent on getting by, compared to 29.2% a year ago, an increase of 7.7% and home to the biggest rental affordability squeeze outside of the capital.

It would seem no one is safe from the ever-growing issue of rental affordability with Nottingham home to the next biggest squeeze (+6%), while Midlothian (+5.6%) and Edinburgh (5.5%) have seen the biggest increase north of the border, sandwiching Elmbridge (5.6%).

Finally, Corby in Northampton has seen the percentage of salary spent on rent jump by 4.8% in a year along with the worst offender in Wales – Conwy.

Co-founder of Bunk, Tom Woollard, commented:

“Whilst there are some areas where strong growth in salaries has seen rental affordability actually improve for many, this research demonstrates that this isn’t the case across the board, and a lot of tenants are a lot worse off than we were just a year ago as a result of increasing rents and stagnant wage growth.

This isn’t an issue that is confined to London either. All over the UK, an overheating rental market is seeing tenants spend more cash on putting a roof over their heads, and it doesn’t look as if this will change anytime soon.

Tenants are already being stretched in terms of affordability and it will be interesting to see how much this gap grows now that the tenant fee has been introduced.

Traditionally letting agent fees won’t have been included as ‘rent’ but with many now passing these charges on via an increase in rent payments, we should see a notable spike in the cost tenants are paying and the percentage of their salary this accounts for.”

Location
2017
2018
% change in rent as a % of salary YOY
Average annual rent
Annual salary
Rent as a % of salary
Average annual rent
Annual salary
Rent as a % of salary
ENGLAND
£9,972
£29,565
33.7
£10,128
£30,411
33.3
-0.4
WALES
£6,120
£24,901
24.6
£6,182
£25,438
24.3
-0.3
SCOTLAND
£8,216
£27,412
30.0
£8,786
£28,116
31.3
1.3
NORTHERN IRELAND
£7,176
£24,972
28.7
£7,344
£25,759
28.5
-0.2
UNITED KINGDOM
£7,871
£26,713
29.5%
£8,110
£27,431
29.6%
0.1%
 
Worst 10 locations – by % increase of rent as a % of salary
Location
2017
2018
% change in rent as a % of salary YOY
Average annual rent
Annual salary
Rent as a % of salary
Average annual rent
Annual salary
Rent as a % of salary
City of London
£25,224
£70,179
35.9
£26,268
£54,498
48.2
12.3
Richmond upon Thames
£20,052
£62,858
31.9
£24,000
£58,127
41.3
9.4
Hackney
£21,024
£37,259
56.4
£22,272
£34,069
65.4
8.9
Rutland
£9,372
£29,578
31.7
£9,756
£24,751
39.4
7.7
Nottingham
£6,816
£23,370
29.2
£8,040
£22,894
35.1
6.0
Midlothian
£11,328
£26,628
42.5
£12,816
£26,607
48.2
5.6
Elmbridge
£18,924
£43,130
43.9
£23,796
£48,112
49.5
5.6
City of Edinburgh
£11,328
£34,341
33.0
£12,816
£33,312
38.5
5.5
Corby
£6,984
£23,531
29.7
£7,920
£22,948
34.5
4.8
Conwy
£6,088
£23,607
25.8
£7,043
£23,030
30.6
4.8

 

Sources
Rental Costs
England
Scotland
Wales
Northern Ireland
Salary Statistics

 

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