The latest data from the May 2014 HomeLet Rental Index shows that the average tenant signing a rental agreement in May 2014 had an income 7.2% higher than the average tenant a year previously.
The index, the largest survey of private tenants in the UK, shows that the incomes of tenants taking on new properties have risen faster than rents in nine of the 12 UK regions covered with the average rent in the UK now standing at £846 a month, or £687 a month outside of Greater London.
The exceptions were Yorkshire and Humber, Northern Ireland and Greater London, though in the capital the average income increase over the past year of new tenants has lagged the average increase in rental cost by just 0.6%.
The effect is that across the UK as a whole, excluding London, rents rose by 2.5% but even with the highly distorting effect of London reinstated in the data, the average rent increase came in only marginally ahead of the average rise in incomes of tenants signing new rental agreements.
East Anglian tenants have faced the largest increase in average rents over the past 12 months. Demand for property in this region, with its proximity and strong transport links to London, may have been increased by a spill over of demand from the capital.
In Greater London, rents were on average £116 higher per month in May 2014 at £1,348, when compared to May 2013 when the figure was £1,232. Just as London’s house prices are rising far more quickly than in the rest of the UK, so too is its rental sector.
According to the index report the figures will reassure buy to let landlords amid some concerns that rent rises would price many would be tenants out of the market as there appears to be a steady supply of new tenants with higher incomes.
The Office for National Statistics says average incomes are currently rising by 1.7% a year in the UK. However, new tenants coming into the market, possibly in the face of higher house prices and tight mortgage finance, have the incomes required to pay higher rents.
‘The rental market is in robust shape. While rents are rising, there is not a shortage of tenants who are able to pay, and the return for investors in rental property looks secure,’ said Martin Totty, chief executive officer of Barbon Insurance, the group that owns HomeLet.
‘This is good news for tenants and landlords alike. We expect demand for rented accommodation to continue to rise, while investors will no doubt be attracted to the returns on offer in the sector if they are confident in tenants’ ability to pay,’ he added.
