Graduates priced out of rental market despite easing rents

Despite rents dipping, graduates are still struggling to find affordable places to live, according to new research.

Data from SpareRoom suggests entry-level wages are not keeping pace with the cost of living, with under-25s in the rental market in steady decline.

The flat-share website data reveals the average monthly room rent, throughout the UK excluding inner London, is £668, and for the whole of the UK, including inner London, is £747 per month.

Gross salary of £39k

According to the data, London ranks fifth in LinkedIn’s list of UK areas with the fastest year-on-year growth in entry-level jobs.

However, SpareRoom warns that to afford rent in the capital, where the average room costs £978 per month, graduates would need a minimum gross salary of around £39k, based on the recommendation that no more than 30% of income should be spent on housing.

SpareRoom suggests graduates may be better off considering Exeter, which ranks third for growth in entry-level jobs and has average room rents of £662 per month, below the UK average.

Alternatively, Nottingham ranks sixth for entry-level job growth and offers more affordable rents, with average room costs of £581 per month.

Rents haven’t seen meaningful decreases

Matt Hutchinson, director of flatshare site SpareRoom, explains graduates are having to balance the cost of living with rising rents.

He said: “Graduates chasing job opportunities and looking to relocate may find affordable rooms are scarce, because rents, although no longer rising dramatically, haven’t seen any meaningful decreases either.

“Under 25s are in steady decline in the rental market because grads today aren’t only contending with high rents.

“Student loan repayments reduce disposable income at a time when the basic cost of living, including energy bills, food and fuel, is sky high, and the loan repayment threshold is due to be frozen from next year, triggering more grads into repayments. So it’s little wonder more young people aren’t leaving home, even if it does limit their career opportunities.

“A healthy economy relies on a fluid workforce, so when even flatsharing becomes unaffordable, you know you have big problems. Salaries either have to increase to reflect the higher cost of living, which puts huge pressure on businesses, or the government has to take action to make housing more affordable for lower-paid workers, which includes those just starting out in their careers.”

Steady decline in rental market

According to the Office for National Statistics (ONS) data, under-25s in the rental market have been in steady decline over the past decade.

In 2015, this age group made up almost a third (32%) of the flatshare market, but by 2025, 18–24-year-olds accounted for just over a quarter (26%).

ONS data also shows the median annual salary for 22–29-year-olds in full-time employment is £29,855, which SpareRoom says can make it unaffordable to live in several of the UK areas with the fastest year-on-year growth in entry-level roles.