RISING wages are set to outstrip rent increases during the summer for the first time in more than four years, according to a new forecasts from LSL property services.
The estate agents indicate wages will rise by 2.2 per cent this year, based on the projections of the Office for Budget Responsibility and the Office for National Statistics’ seasonal adjustments.
LSL believes rents will rise by 1.7 per cent over 2014. By July, the group thinks both wages and rents will have risen by 1.6 per cent in the previous 12 months, before pay growth starts to climb faster. The last time wage hikes outstripped rising rents was in April 2010.
“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,” said David Newnes, director of Your Move and Reeds Rains, which are part of LSL Property Services.
The forecast also means that rent as a proportion of residents’ incomes is likely to start sliding once again: in 2009, they made up around 36 per of gross earnings, rising to 38.2 per cent in 2013 after years of sluggish wage growth.