How far can rents actually rise?

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We recently received another thought provoking blog post from .id the population experts. The topic was based on “rent & mortgage” data that has just been released from the 2016 Census.

As you can see below, median weekly rents have been on the rise since the 2011 Census.

median rent

Whilst these rent increases have been substantial, it is the share of a renter’s income that these payments absorb that could give landlords cause for concern.

We found this comment particularly interesting; “nationally, the average household with a mortgage pays 18.9% of their income on the mortgage, while the average renter pays 27.5% of their income on rent”. The table below illustrates this point.

median income on median rent

Many of us have enjoyed a low-interest rate environment over the last five years; however, almost every investor will probably tell you that rental yields are now very low. Should interest rates rise over the coming years, we wonder if these numbers indicate that tenants may not be able to cover a landlord’s rising costs.

Whilst there is little to suggest that an increase in rates is just around the corner, we are sure that many might be tempted to cover themselves with a fixed-rate mortgage.

Contact your Smartline Adviser today to discuss more on this topic.

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