PRS Statistics Bulletin – August 2017

by | Aug 30, 2017 | Blog post, Housing Supply & Rents, Rental Index

Welcome to the August PRS Statistics Bulletin from the RLA Private renting Evidence, Analysis and Research Lab (PEARL).

We have rounded up all of the latest housing statistics and data updates from across the private rented sector and compiled them into one easy to digest bulletin. This month we have the annual data update regarding house building completions, along with the latest monthly figures regarding house prices, private rents, buy-to-let mortgage activity, and possession statistics.

PRS Evidence Dashboard Update

In August there were updates to the following data-sets and indices:

  • Index of Private Housing Rental Prices (IPHRP)
  • CPI
  • House Price Index
  • Average Weekly Earnings
  • Mortgage Activity (Value & Number of Buy-to-let mortgages)
  • Housing Completions by Tenure (UK)
  • Mortgage and Landlord Possession Statistics

You can find the updated statistics displayed on our PRS Evidence Dashboard here.

Index of Private Housing Rental Prices (IPHRP)

The latest Index of Private Housing Rental Prices (IPHRP) shows that private rents increased in Great Britain by 1.8% in the 12 months to July 2017. This figure remains unchanged for the past 4 consecutive months. Across Great Britain there were varying rental price changes in the 12-month rate to July 2017:

  • England rental prices grew by 1.9%
  • Wales rental prices grew by 1.3%
  • Scotland rental prices grew by 0.2%
  • London rental prices grew by 1.5%

Great Britain and the countries within have all experienced rental price growth since 2011, however, rental prices have grown more in England than in Scotland and Wales. In Scotland, rental price growth has weakened since June 2015 and has remained near to 0% growth since August 2016. While Wales has experienced stronger rental price growth since November 2016.

The latest data is indicating a slowdown of rental prices across Great Britain since 2015, and this slowdown is being driven by the London market. With prices in London is 0.3 percentage points below that of Great Britain.

Consumer Prices Index (CPI)

The Consumer Prices Index 12-month rate remains unchanged for July 2017 at 2.6%. In comparison to the IPHRP, inflation increased by 0.8 percentage points more than private rents for the year until July 2017.

House Price Index

In the year to June 2017, average house prices in the UK increased by 4.9% (this was down from 5% in May 2017). UK house price growth has slowed since June 2016 (from 8.2%) and has now stabilized at around 5% for 2017 so far. Growth in UK house prices was contributed mostly from growth in England. Across the UK, house price change for the year to June 2017 was the following:

  • England house prices grew by 5.2%, with the average house price now at £240,000
  • Wales house prices grew by 2.6%, with the average house price now at £152,000
  • Scotland house prices grew by 2.9%, with the average house prices now at £144,000
  • Northern Ireland prices grew by 4.4%, with the average house prices now at £129,000
Average Weekly Earnings

In the year to June 2017, Average Weekly Earnings (AWE) Regular Pay increased by 2.1%, with average weekly earnings now at £474.

However, when we look at Real Average Weekly Earnings (this index is produced by dividing AWE by CPIH to compare weekly earnings against inflation including housing costs) this has remained unchanged at -0.4%, with decreases in Real AWE recorded since January 2017. This suggests households are being squeezed with costs increasing at a higher rate than wage growth.

Buy-to-Let Mortgage Activity

Buy-to-let lending activity in June 2017 remained consistent in comparison to previous months, at 6,100. This figure has remained unchanged since October 2016. The number of buy-to-let mortgages for new house purchases has not recovered from the Stamp Duty changes, and are well below the number for May 2013 (at 6,900). Remortgaging is currently driving buy-to-let lending activity, with 12,400 remortgages in June 2017. This has remained relatively consistent since June 2015, apart from a spike in Q1 2016.

The buy-to-let lending activity is demonstrating significant trends and indicates that the stamp duty changes have hampered the previous strong growth in the private rented sector. This could limit the future supply of private rented properties, reducing supply for tenants and could potentially lead to increased competition in the market.

Housing Completions by Tenure (UK)

Overall, the number of Housing Completions across the UK decreased between 2015 and 2016 by -0.32%. This decrease was driven mainly by a 17% decrease in the number of Housing Association completions between 2015 and 2016. This is despite growth in private sector housing completions, from 133,370 completions in 2015 to 138,200 in 2016 (3.6% increase).

Mortgage and Landlord Possession Statistics

The latest statistics from the Ministry of Justice (MoJ) shows the continued decline in Social Landlord possession claims and accelerated possession claims (Section 21 – both Private and Social Landlords) for Quarter 2 2017. However, Private Landlord possession claims have increased by 2.8% between Q1 2017 and Q2 2017. Yet, it is important to note that there were 72% more Social Landlord possession claims in Q2 2017 than Private Landlord possession claims. In addition, the number of possession claims by Private Landlords in Q2 2017 represents 0.08% of the total private rented sector.

Updates from across the sector

Royal Institution of Chartered Surveyors

The latest RICS UK Residential Market Survey for July 2017 indicates that there is a ‘lack of momentum’ in the UK Housing Market. RICS reported that a “sustained deterioration in the flow of fresh listings coming onto the market continues to hamper activity”.

With the number of new instructions declining for 17 months. This means that home buyers are limited with new properties to choose from, however, at a similar time, the number of buyer enquiries remained slightly negative (at -4%). Indicating that the number of buyers is decreasing, suggesting a stall on both the number of properties available to buy and the number of buyers.

In terms of the private rented sector, the figures from RICS provide a varied picture. Tenant demand was reported to have sightly increased, however at the slowest rate for the past 20 years. At the same time, landlord instructions have continued to fall and RICS are reporting a sustained lack of supply of new homes to rent. RICS explain that this means rents are expected to raise modestly over the next few months.

ARLA

ARLA reported mixed findings in their UK Private Rented Sector Report for July. This report signals significant increases in tenant demand, however, only slight increases in the number of properties managed by an agent. This report also identified more agents are seeing rental prices than in May, 31% up from 27%.

Both the findings of the ARLA report and the RICS report indicates a dwindling supply of private rented homes at the same time of increased tenant demand. From these reports, it is evident that tenants are already facing rent increases from the increased competition for properties.

RLA PEARL

Our own latest Quarterly Survey Report provides a stark outlook for the private rented sector. With more landlords planning on reducing the size of their portfolio, than the number set to increase the size of their portfolio. We estimate this will lead to a net loss of 76,000 homes to rent over the next 12 months.

If we take this against the significantly hampered buy-to-let mortgage activity, it is likely that the number of new homes to the market will not increase anytime soon. It is becoming clear the unintended consequences of government policy is damaging the housing market and without change there will be negative consequences for both landlords and tenants.