David Alexander comment: The rental market really is a game of two halves

A few years back, the sports section of Scotland On Sunday indulged in an interesting statistical experiment.

It was the cost of renting in London and the south-east that hit the headlines, says Alexander. Picture: contributed.
It was the cost of renting in London and the south-east that hit the headlines, says Alexander. Picture: contributed.

In addition to publishing the current placings in the Scottish Premiership, the paper carried an “alternative” table showing what the standings would have been without the Old Firm, so dominant were Celtic and Rangers at the time – unlike the present season when, at the time of writing, just five points separate the top six teams.

I sometimes wonder if data-collectors should produce national demographic league tables with London excluded because of the effect statistics in the capital have on average figures for the whole UK.

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This was reinforced with the results of last week’s nationwide survey by the BBC into rental costs for young tenants. This showed that, across England, an individual aged 22 to 29 needed to earn £24,800 per annum for a rented one-bedroom flat to be “affordable” (with the average for Scotland being just £100 less). To be fair, the survey was comprehensive, but it was the cost of renting in London – where a salary of over £51,000 is needed to “afford” to rent a one-bedroom house or flat – and the wider south-east that hit the headlines.

As Kate Faulkner, housing analyst and managing director of Propertychecklists.co.uk, was quoted as saying, renting could be affordable in many areas outside London, but the particular squeeze in the capital meant many other pressing concerns for these tenants were overlooked by policymakers.

According to the survey, in London, a twentysomething with a typical average income would spend 55 per cent of monthly earnings on a mid-range one-bedroom flat. This, however, rises to 156 per cent, in the most expensive part of London – where an average one-bedroom home costs £3,500 a month to rent.

This compares with the 15 per cent of salary that someone in the 22 to 29 age group would have to pay for a similar-sized property in Argyll and Bute. This is one of four Scottish postcodes that help make up the five most affordable in the UK to rent – the others being two in the Borders (19 per cent and 20 per cent respectively) and another in East Ayrshire (20 per cent).

Admittedly, these locations are hardly rental hot spots and, yes, there are parts of Scotland where rental costs to income are relatively high. Take EH2 (a central Edinburgh postcode) where the average monthly rent for a one-bedroom flat is said to be £816, or 47 per cent of income. However, EH2 is largely made up of the New Town, which is a magnet for executive tenants.

And people do have a choice. Take EH12, which extends from Haymarket railway station almost to the airport and is popular with tenants who fly regularly on business. Here, the rental cost to income ratio drops to 40 per cent – and were it not for the fact that it includes some high-value crescents, in effect Victorian extensions of the New Town, the average ratio would probably be lower.

Rentals in Glasgow G12 took up 40 per cent of income, hardly surprising given it takes in Byres Road, the Botanic Gardens area and the University, and is popular with people prominent in the media, arts and entertainment. The ratio in G1, taking in the heart of the city, is 41 per cent, with actual rents slightly higher than in G12; this might surprise some given G12, which is the “West End” by any other name, has historically been the highest-value rental location in Glasgow.

But back to my original point, which is that the salary needed to afford a one-bed rental flat is less than half in Scotland than in London. While no one could argue that young Londoners are crying out for more affordable rented accommodation and action is needed to achieve this, the moral of the survey is that the market across the UK is a broad church and that solutions should be multi-faceted and based on local levels of supply, demand and disposable income.

David Alexander is MD of DJ Alexander.