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Insight & Opinion

Wage growth to overtake rental rises in 2014

Author: Gemma

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A new report has revealed wage rises could overtake the rate of increasing rental costs during 2014. 

LSL Property Services has suggested that the pattern of rents rising at a faster rate than wages could come to an end as early as April this year.

In 2013, average earnings of UK workers increased by 1.1 per cent, in comparison to a growth of 1.6 per cent in the cost of rents – calculated on the same seasonally adjusted basis.

During 2012 this gap was even more significant. Rents rose by 3.2 per cent during the year, while wages only grew by 1.3 per cent.

However, 2014 is set to be a completely different picture, with LSL predicting a rent rise of 1.7 per cent in comparison to wages growing by 2.2 per cent during the same period. 

According to the property experts, July may see earnings match rent rises at 1.6 per cent on a seasonally adjusted basis. This could happen as early as April if wages grow at a faster pace than initial forecasts. 

This suggests that tenants taking advantage of rental property will soon benefit from more disposable income, significantly decreasing the potential for failed monthly rental payments to landlords. 

LSL said disposable income for those in the private sector could rise for the first whole year since the financial crisis hit. 

David Brown, commercial director of LSL Property Services, said that although the market is still some way off complete recovery, things are getting better.

“As the economic recovery takes hold, there will be plenty of surprises and stumbling blocks. But the cost of rented accommodation is growing at a sustainable rate. The last time rents were rising more slowly than wages was four years ago and that was only due to a rapid dip in rents following the collapse of purchase prices,” he said.

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