From The Metro:
Jobs website Adzuna compared average advertised salaries with average rental figures across the UK to find the most and least affordable towns and cities for renters to live. In Swindon, workers typically spend 11.5 per cent of their take-home pay on rent, compared with a national average of 22.1 per cent.
Bradford, Hull, Dudley and Durham complete the best-value top five, with workers in these areas typically paying less than 13 per cent of their net wages on rent. At the other end of the spectrum, Londoners typically shell out 41 per cent of their pay on rent while those in Oxford can expect to see it swallow up 39 per cent of their take-home wages...
Andrew Hunter, co-founder of Adzuna, said: ‘Even though workers may be paid a higher monthly salary, their left-over cash is often smaller after paying steep living costs and local property premiums.’
Correct. Why would you expect any other outcome?
They list the areas with the lowest and highest rent-to-income ratios, quite unsurprisingly, these are pretty much in line with the local average wages that people in their twenties and thirties can earn.
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12 comments:
Re "why would you expect any other outcome", I would expect ROUGHLY that outcome, but not necessarily exactly that outcome. I.e. high salary towns & cities can be expected to be those where there are significant economy of agglomeration effects, which in turn will push up property prices. But I wouldn't expect higher rents to necessarily totally cancel out the higher salaries.
Marks out of ten from teacher will be appreciated.
RM, 10/10, there are lots of other minor factors involved, so relationship is not 100% exact. But about 80% - 90% of rental differences are down to average wages.
Ralph,
While you are here. Your last 5 or 6 entires in 'Bits and Bobs' have been very good IMHO.
I never really know what to make of Wren Lewis, so your run through on him was also helpful too. Reading RM on SWL posts is like reading a rollercoaster journey :)
I can see why people would be reluctant to live in Bradford, Hull of Dudley, but Swindon has a good rail service to London or does the low rent reflect the money spent on train fares? If so, why not Newbury and Basingstoke inter alia as well? Also Durham is a beautiful place to live and has lots of students which should push the rents up.
Bayard,
Interesting points, I was thinking about Bristol example and its train mainline into London for Mark's other 10% factor.
My conjecture from your list (from no particular research or property skin in the game):
1)Swindon - rents are higher than other 'less than nice 'remote' towns? On a straight line: I would choose 'linked' Swindon over 'linked' Luton, if forced. Oxford and Cambridge will have even more ('extra factors' to be accounted for)
2)Durham living- again rents are higher, because of students, transport and it is a very nice city etc.
So compare Durham 'like with like' with North West living. If you were forced to - Blackpool, Morcombe, Preston,etc, not so nice. But Lancaster, up the road, has the University, students, tourist city centre (base for Lake District) and the mainline. Rents are higher.
Hi, so what's the formula? Keep the income minus rent and commuting cost constant in absolute terms across the country? I understand it like this: if "the market" allows me to keep £900, then in a town where average salary is £1000, the rent+commuting would be £100, which is 10% of the average salary, whereas in another town, where average salary is £3500, and I am still "allowed" to take home disposable income of £900, the rent+commuting would be £3500-£900 = £2600 which is 75% of my salary. Is this how it works? And I did not check real numbers, because I cannot find the link to the actual article on https://www.adzuna.co.uk/
B, the other 10% - 20% depends on how 'nice' an area is and other factors (lots of students for example), MikeW gives examples.
PW, what's the formula?
"Keep the income minus rent and commuting cost constant in absolute terms across the country?"
That's pretty much it. I've done these regressions (using harder numbers) often enough on this blog, there is a baseline minimum income per person and most of higher wages above that baseline go to travel costs/rent.
So wages minus travel costs minus baseline minimum = rent, just like you say.
thanks, @MW - did you link a spreadsheet somewhere with the regression on more realistic numbers please?
PW, just click the label under the post 'Ricardo's Law of Rent' for endless articles on this blog, some have more definite numbers than others.
Of click here.
I only use spreadsheets for background working and then summarise in the article. You can do your own spreadsheets, it's just a question of getting data on local wages and rents/house prices from somewhere or other, creating an XY scatter chart and adding a line of best fit and/or calculating the coefficient of correlation.
Thanks!
Mike, Mark, I was asking why were Swindon and Durham so chep to rent in and you seem to be giving reasons why they would be expensive places (as one would expect them to be).
I wonder if the "cheap" rents in Durham are actually averaged across the entire area covered by the City of Durham parliamentary constituency (the same as the former City of Durham local government district)?
This includes not just Durham City proper – which houses are extremely expensive (at least to buy) as befitting a city hosting a UNESCO World Heritage site (the Cathedral and Castle) – but also about a dozen former pit villages where land values will be much lower.
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