Monday, 28 April 2008

Average earnings and rents


A regular reader - asteve - asked about the seasonality of average earnings, bonuses and rents. Hopefuly, this chart will clarify things a little. Bonuses are highly seasonal, rents are stable.

As the chart suggests, rents are lagging behind average earnings. It is a great time to rent. In fact, all renters would agree on one thing. We need more buy-to-let investors and not less. They help keep housing costs down.

Can mortgage-oppressed home debtors say the same thing about their housing costs?

5 comments:

aSteve said...

I really had no idea that bonus payments had such a large effect... sure, I realized that it was a big deal for city-types... but I thought that was balanced by them being few in number...

I wouldn't expect bonus payments to affect rents... partly because they are difficult to predict - and partly because such people likely have a mortgage rather than a landlord for their primary residence - if accommodation is a significant expense for them.

Alice Cook said...

Asteve,

You have to look at the chart closely. It is an index based on 100. Wages aren't growing that fast, the the deviation from the non-seasonal component is not that great. It looks a lot because of the way the chart is rescaled.

However, the main point is still valid - wages have grown faster than rents.

Thanks for the comment.

Alice

powerman said...

"I really had no idea that bonus payments had such a large effect... sure, I realized that it was a big deal for city-types... but I thought that was balanced by them being few in number..."

IIRC, 'the city' accounts for roughly a sixth of our GDP, but with only a fraction of a percent of our population comprising its workforce.

That's why the members of that workforce can command such vast bonuses (when they've had a good year. They get sacked quick as a flash when things go wrong).

Anonymous said...

City bonuses are massively misunderstood by outsiders, IMHO. There's a senior management level that do pretty good each year (but a tiny number of people). The really big bonuses are paid to front office deal makers / traders and again there's very few of them. And typically the recipients of the mega bonuses are different people each year.

I'd estimate about 90% of the City workforce get's no more than 15% of salary as bonus. Would love to see reliable figures.

But the main learning point I think is that working in the City does not = obscene bonus.

Nick

Eric said...

I am not surprised by this data. I have for some time felt that rents were growing modestly. Good work.