Working tenants renting property in the UK private rented sector have diminishing amounts of disposable income after new research revealed that average PRS rents rose four times faster than average UK salaries increased.
The March 2013 HomeLet Rental Index shows the average cost of renting property in the UK private rented sector increased by 3.3% during the first quarter of 2013 to average £776 (GBP) per month.
In contrast, the average amount working tenants earn in a year only increased by a minimal 0.8% over the same period to £27,300 (GBP).
Although the 3.3% rise is much higher than that of tenant income, the increase in PRS rents has apparently slowed.
Data from March’s report also shows the average cost of renting a property in the UK PRS in the first quarter of 2012 increased by 3.4% and a significant 6.9% in 2011.
The development of Rent Guarantee insurance products does appear to give working tenants and their landlords a little peace of mind, as the rental income recieved by the landlord is guaranteed should the tenants financial or employment circumstances change, however tenants must have been subject to comprehensive tenant referencing prior to the commencement of the tenancy.
HomeLet’s Business Development Director, Andy Richards, said: “Although rents haven’t increased at such a high rate in the first quarters of 2011 and 2012, tenants appear to have less disposable income as their salary has only increased by a minimal amount. With less money to save for a mortgage, this could increase tenancy lengths as tenants may not have the funds to purchase their own home – which may then decrease the number of available rental properties.”
Other data extracted from the HomeLet Rental Index shows the percentage of unemployed tenants and tenants claiming housing benefit moving into new private sector rental properties increased by 6% over the last 12 months.
The gradual decline of social housing in the UK has been cited as the main reason for the migration to the private rented sector.
With the introduction of the Bedroom Tax in 2013 and less social housing accommodation actually available, it appears that the UK private rented sector is becoming the only option for those who rely on benefits, which places undue strain on the supply of suitable rental properties for other tenants who may already be employed.
The recent announcement by the coalition Government to grant an extra £1 Billion (GBP) for the Build to Rent and Build to Let initiative schemes is intended to address the supply and demand issue within the private rented sector.
This will not only benefit lettings and property management agents who hope to have an increased number of properties available to market to the throng of tenants desperate for quality rental accommodation, but also landlords who are able to raise buy to let mortgages will be able to expand their rental property portfolios to house an increasing amount of tenants.
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