In 12 local authority areas in the UK a person on an average salary would have to spend 60% or more of their income to pay the average private rent.
These findings come from research by Full Fact, an independent fact checking organisation, which selects its research as a result of public debate on key issues. They decided to look at average private rents following a statement by Labour’s shadow secretary of state for health, Diane Abbott.
Abbott who is MP for Hackney North and Stoke Newington has last week said:
“There are people paying astronomic rents nowadays – 60% of your income on rental.”
Full Fact has confirmed this is the case but only in 12 local authority areas including Abbott’s constituency Hackney.
In order to check this, the company used data from the Office for National Statistics and research undertaken by the House of Commons library, concluding all 12 areas were in London.
Across England, private tenants spent an average of 35% in 2015/2016 according to Full Fact.
This follows news that the gap between house prices and average earnings has reached a record high in London according to a study conducted by Hometrack.
The UK Cities House Price Index revealed that the property price to earning ratio in the capital is now 14.5 times average earnings – 42% higher than the average for the last 15 years.
Cities following behind included Cambridge with a ratio of 14.3, Oxford with a ratio of 12.6 and Bournemouth with 10.1. Bristol followed close behind with 9.7.
In contrast to this however, the Northern cities of Liverpool and Newcastle have current house to earning ratios lower than the 15-year average at 4.5 and 4.7 respectively. So does Glasgow with a current ratio of 3.9.
Overall across the UK the rate of city house price growth has increased significantly, from May’s figure of 2.8% to 6.1% in October 2017 – the highest rate of growth since September 2016.
Unlike in other regional cities where the house prices adjust to the levels that home buyers are prepared to pay and afford, the capital looks set to underperform over the next two to three years. This has led to a 15% drop in the number of first-time buyers in London over the last three years.
It is expected the recently announced changes to stamp duty will not impact this trend as the biggest challenge for first-time buyers continues to be the income required to pass mortgage affordability stress tests.
Research and insight director at Hometrack, Richard Donnell said:
“Unaffordability in London has reached a record high despite a material slowdown in the rate of house price growth over the last year,”
Donnell continued. “lower housing turnover in the capital has led to a tightening of supply in recent months which has stabilised house price growth.”
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