Rents are up across the UK but tenant incomes can support the increase, according to the latest rental index from Homelet.
The May 2014 HomeLet Rental Index reveals 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 HomeLet Rental Index shows that the incomes of tenants taking on new properties have risen faster than rents in nine of the 12 UK regions covered by the HomeLet Rental Index over the year to May 2014. The average rent in the UK now standing at £846 a month, or £687 a month outside of Greater London.
The exceptions are Yorkshire & 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 percentage points.
The effect is that across the UK as a whole, stripping out London, rents rose by 2.5%. 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.
The figures will reassure buy-to-let landlords – while there have been fears that rent rises would price many would-be tenants out of the market, 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.
Martin Totty, Barbon Insurance Group’s chief executive officer, said: “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.
“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.”