Rent rises will be overtaken by wage growth in 2014, while disposable income for those in the private rented sector is set to grow for the first whole year since the economic downturn, according to the latest analysis by LSL Property Services.

The historically significant cross-over of earnings growth and rent rises is most likely to take place in figures for July, but could happen as soon as this month if wages pick up more quickly than in central forecasts. At the very latest, monthly earnings are expected to be rising more quickly than residential rents by December 2014.

Over the course of 2013 average earnings increased by 1.1%, while rents rose 1.6% on the same seasonally adjusted basis. Previously, rents had outpaced wages more than twice over – in 2012 rents rose by 3.2% over the course of twelve months while average regular earnings grew by just 1.3% in the same period.

By contrast, 2014 is set for rent rises of 1.7% over the course of twelve months and average earnings growth of 2.2% over the same period. By July earnings are expected to match annual rent rises, at 1.6% on a seasonally adjusted basis.
The last time rents rose more slowly than earnings on the same twelve month seasonally adjusted basis was in April 2010, meaning this expected crossover will be the first time regular earnings have outpaced rent rises in at least four years.

David Brown, commercial director of LSL Property Services, commented: “The longest recession in living memory has been banished to the history books. And this year the squeeze on living standards is finally abating too. Households have withstood half a decade of bombardment from weak earnings, inflation – and a general spectre of gloom. We’re still some way from the finish line, but for now things can only get better.

Rugby letting agents, Cadman Homes, have also seen this trend being echoed locally, with rental figures still buoyant, but increases softening slightly. There is also a reported uplift in footfall in Rugby town centre, and new shops opening in the town centre. National and local businesses seem to be doing well, and higher levels of disposable income will be a contributing factor in this, as well as the influx of people moving to Rugby due to the high levels of commercial and industrial expansion being seen in the Rugby area.

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