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Average Salary vs Average Rental Price Around The World

How realistic is it to live in the most expensive cities in the world?

We all know that the rich and wealthy can more often than not afford to get by. But, not everyone who works in the city is a high flyer!

What about the average earner? For many people, the average price of a property significantly outweighs their salary or wages.

We took a closer look at the most expensive cities in the world to see how the average income compares to the average cost of rent.

What we found was that almost all of the cities studied would take well over the recommended 30% of salary in order to rent there – why is this? Could it be that too many properties are being built for higher earners? Is the wealth disparity gap becoming too big to close?

Click our map here to explore our findings…

Data source in this document. 

Are Average Earners Being Priced Out Of These Cities?

Global wealth inequality has been an issue since the dawn of capitalism – the rich, we believe, will only get richer.

Today, around 70% of the world’s population owns less that $10k. Incredibly, just 1% of the world’s population controls over half of the world’s wealth.

According to a study by the IRS in 2015, to make it into the 1%, you need an annual income of at least $480,930 – to put this in perspective, the average full-time working American earns just $47,060 a year.

Another issue with the wealth divide? Location!

Property prices of an area are key to revealing how far the wealth divide has gone. Affordable housing is increasingly becoming a pressing issues in cities across the world, as markets becomes dominated by properties aimed towards high earners.

So, the circle continues to spiral. Wealth accumulates in cities where earnings are high and properties are expensive. North America and Europe in particular have become centres where earnings are high and, naturally, housing has become eye-wateringly expensive.

The Average Salary vs Average Rent

To illustrate this, we have compared the average net monthly earnings of the most expensive cities in the world with the average cost of renting an average priced property. This gave us a percentage of how much of a monthly salary would be spent on rent.

Take a look at our results below…

Percentage of average salary needed to spend on average rent

  1. 1. Hong Kong – 151%
  2. 2. London – 81%
  3. 3. New York City – 65.49%
  4. 4. San Francisco – 53.64%
  5. 5. Geneva – 46.44%
  6. 6. Zurich – 43.48%
  7. 7. Lausanne – 40.37%
  8. 8. Grand Cayman – 38.64%
  9. 9. Mountain View, CA – 36.56%
  10. 10. Basel – 22.33%

No, Hong Kong is not a mistake – the average salary could not afford you an average priced home to rent in the city.

Is Renting Property Too Expensive?

The general rule of thumb is that only 30% of your earnings should be spent on rent. In the cities we have studied, while salaries are often high, a huge proportion must go towards keeping a roof over your head. Only Basel in Switzerland is within the recommended portion of rental outgoings.

Shockingly, our study shows that average earners are completely priced out of living in Hong Kong. This suggests that those with below average incomes who work within the city must find property elsewhere – resulting in longer commutes.

This is backed up by this study which reveals that nearly half of Hong Kong flats rent for 70% of medium household income.

London and New York City are not far behind. High rent is pushing average earners further out. Only those on a high income can afford to make these cities their home.

According to this 2017 study, the most luxurious area of London will set you back £2.8m in property purchase price. Here, 38.3% of households earn over 100k.

For further context, to be in the UK’s top 1% of earners you need to earn £140k a year. In contrast, the average full time worker across all areas of the UK was £35,423 in 2018.

Overall, for almost all of the most expensive cities we studied, it is too expensive for average earners to rent a property.

World’s Highest Salaries vs Rental Cost

It’s no coincidence that many of the most expensive cities are also where salaries are highest.

San Francisco has been named as the city with the world’s highest earners. Along with Mountain View, this is down to the Silicon Valley tech giant boom. However, even they aren’t immune to wealth disparity. In fact, they are said to have one of the largest wealth divides in the country, with high earners increasingly taking home more money, while mid-weight earners are seeing their salaries lose value.

Here are the most expensive cities by their World Salary Ranking:

  1. 1. San Francisco
  2. 2. Zurich
  3. 3. Geneva
  4. 4. Lausanne
  5. 5. New York City
  6. 6. London
  7. 7. Hong Kong

(n.b – no data for Grand Cayman, Mountain View and Basel)

Interestingly, the cities with the lowest salaries are also those which were ranked as taking the largest proportion of salaries for rent. What does this mean? It could be that a small number of extremely high earners are overwhelming average earners in these areas.

So What Does it All Mean?

A simple comparison of the average earning vs the average rental cost highlights the following:

  • Only those with high earnings can afford to live in the most expensive cities
  • The cities with lower World Salary rankings take a higher percentage of income on rent – suggesting a greater wealth disparity

What do you think of our findings? Share this data with your colleagues and let us know!

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