PEARL Rental Index – February 2018

by | Feb 21, 2018 | Blog post, Rental Index

PEARL Rental Index

We have rounded up all of the latest housing statistics, rental index updates and data on renting from across the sector and compiled them into one easy to digest bulletin.

Headline findings:

  • Rental price growth weakening for Great Britain, with the latest rental index showing rents had increased by 1.1% in the 12 months to January 2018
  • London rental prices grew by 0.2% in the 12 months to January 2018, this is 0.9 percentage points below rental price growth for Great Britain
  • Wales rental growth at 1.4% for the 12 months to January 2018, 0.3 percentage points above Great Britain
  • Consumer Price Index inflation remained at 3%
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 1.1% in the 12 months to January 2018. Overall, rental price growth has been slowing since April 2016, with significant drops since August 2017 when rental growth was at 1.8%.

Across Great Britain there were varying rental price changes in the 12-month rate to January 2018:

  • England rental prices grew by 1.1%
  • Wales rental prices grew by 1.4%
  • Scotland rental prices grew by 0.3%
  • London rental prices grew by 0.2%

The rental index shows that rental price growth for Great Britain, England and London are continuing to slow. This slow down is being driven mainly by the London rental market.

The Welsh rental market has strengthened throughout 2017, with a strong uplift in rental price growth, while it is still out-performing England and London, rental growth dropped to 1.4% for the 12 months to January 2018, 3 percentage points down on the previous month.

The London rental market has seen significant changes in the past two years. Rental growth has slowed dramatically, in November 2015, annual growth was at 4.1%, it is now 3.9 percentage points below this figure. If this trend continues, we could expect negative rental growth in the next few months.

At a regional level in England, the regions with the most substantial increase in rents to January 2018 were:

  • East Midland rental prices grew by 2.6%
  • South West rental prices grew by 2.1%
  • East of England rental prices grew by 1.9%

The regions with the lowest annual increases in rental prices were:

  • North East with rental growth of 0.0%
  • London with rental growth of 0.2%
  • North West with rental growth of 1.3%
  • Yorkshire and The Humber with rental growth of 1.3%
Consumer Prices Index (CPI)

The Consumer Prices Index 12-month rate remained at 3.0% for January 2018. In comparison to rental growth and the IPHRP rental index for Great Britain, inflation was 1.9 percentage points higher than private rental growth.

House Price Index

In the year to December 2017, average house prices in the UK increased by 5.2%, up from 5.0% in November 2017. UK house price growth has been slowing since June 2016, where it was 8.2%, and has now stabilised at around 5% throughout 2017.

Growth in UK house prices was contributed mostly to growth in England. Across the UK, house price change for the year to December 2017 was the following:

  • England house prices grew by 5.0%, with the average house price now at £243,582
  • Wales house prices grew by 5.4%, with the average house price now at £154,398
  • Scotland house prices grew by 0.2%, with the average house prices now at £148,783
  • Northern Ireland prices grew by 4.3%, with the average house prices now at £130,482

In England, the strongest regional house price growth in the year to December 2017 was in:

  • South West (7.5%)
  • East Midlands (6.3%)
  • West Midlands (6.3%)
  • North West (5.9%)

The weakest house price growth was in:

  • London (2.5%)
  • Yorkshire and the Humber (2.8%)
  • North East (3.6%)


The region with the highest average house value for December 2017 was London at £484,173, followed by the South East at £322,269, and then the East of England at £290,341. The region with the lowest average house value for December 2017 was the North East at £130,838.

The property type that has experienced the greatest price growth was Semi-detached properties at 5.7% for the year to December 2017, with the average house price at £213,023. The property type with the weakest price growth was Flat or maisonette at 4.7% for the year to December 2017, with the average price at £195,784.

House Sales

The latest data from the HM Land Registry is showing that house sales have continued to decrease in comparison to the previous year. In the UK, house sales were down 8.5% in October 2017 in comparison to the previous year. When compared to September 2017, the number of property transactions across the UK decreased by 6.6%.

Buy-to-Let Mortgage Activity

Buy-to-let lending in December declined 21% for new purchases month-on-month, with 5,300 new loans. Remortgaging is still driving buy-to-let lending activity, with 9,900 remortgages in December 2017. This however, is down 27% month-on-month and 12% year-on-year. This shows a considerable slowing of buy-to-let lending activity, and demonstrates the impact of current government policy towards private landlords who have been put off further investment by stamp duty and mortgage interest relief changes.


Updates from across the sector

Royal Institution of Chartered Surveyors

The latest RICS UK Residential Market Survey for January 2018 indicates that enquiries, sales and instructions have remained negative. At the same time, house prices have edged higher at the national level but continue to decline in some parts of the country. More expensive tiers of the housing market are still experiencing tougher conditions. In the rental market, RICS identify that tenant demand has edged up in the past 3 months, but landlord instructions have fallen again. This imbalance in terms of higher demand and lower supply has prompted RICS to suggest higher rental growth in the near term.

Simon Rubinsohn, RICS Chief Economist, commented:

“The latest RICS results point to housing transactions at a headline remaining pretty subdued over the coming months despite some more positive comments from contributors to the survey. Lack of inventory on agents’ books continues to provide a major challenge with the number of valuations being undertaken not suggestive of a pick-up in new supply anytime soon.

Divergent regional trends remain very much to the fore with the market in many parts of the country still actually behaving in a solid if unspectacular way despite the downbeat headlines. Affordability issues continue to play a key role in explaining this pattern with those areas where house price earnings are most stretched seeing the softest markets”

ARLA PropertyMark

The latest ARLA UK Private Rented Sector Report for December 2017 is showing an increase in the number of properties being managed by agents, while the proportion of tenants facing rent increases has remain consistent with the previous month. At the same time, the report is showing that tenant demand has also increased with more tenants being registered per branch in comparison to the previous month.

David Cox, Chief Executive, commented:

“London is officially the most expensive city to rent a property in Europe, according to recent data from ECA International. This could be due to the fact letting agents in the capital are only managing on average 130 properties, 35 per cent lower than the national average and the lowest level in the country. We need to tackle housing stock to reverse this and stop seeing rents increasing for tenants. The cost of living is already rising at an unsustainable rate and with the added pressures of rising rent costs, the dream of homeownership falls out of reach for the many, even with the Government cutting stamp duty for first-time buyers.

However, it’s positive that we finished the year with the number of properties available for tenants at a record high. Here’s to a positive year for renters; cheaper rents, good living standards and a rental market which works for everyone.”

Countrywide Letting Index

The January 2018 index from Countrywide is showing that rental prices grew 2.4% year-on-year, much higher than the figures from the ONS in the Index of Private Housing Rental Prices. However, the amount of rent paid by millennials was reported to have fallen by 2% as generation Z picks up the baton. Countrywide also report that the total rent bill rises to £1.8 billion in 2017, with a total £51.6 billion paid in rent in 2017.

Commenting Johnny Morris, Research Director at Countrywide, said:

“The rental market grew in 2017. More people joined the rented sector and average rents increased, meaning 2017 saw the highest total rent bill so far. As millenials age, more are becoming homeowners, so the total amount they’re paying in rent has started to drop. But the Generation Rent title still applies. Any fall will be much smaller and slower than seen by previous generations as less become homeowners. For the second month running rental growth in London has outstripped the rest of the country. Stabilising rents in central London alongside rises everywhere else in the capital has pushed the rate of rental growth to the highest level for 22 months. While the rate of growth outside London remains higher than for most of last year, it has picked up to a lesser extent. Across northern England rent rises are running at half the rate of 2017.”

UK Finance

Commenting on the data from UK Finance, Paul Smee, Head of Mortgages at UK Finance said:

“2017 saw the number of first-time buyers reach its highest level in a decade, which is welcome news for those getting started on the housing ladder.

“But although the market remains competitive there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year.

“We are also seeing a less buoyant buy-to-let market, which continues to be impacted by recent tax and regulatory changes. This will continue to flatten gross lending volumes this year.”

Your Move – Buy-to-Let Index

The latest Buy-to-Let Index from Your-Move for January 2018 shows that the East of England has seen the fastest growth in rents. The North East offers the cheapest area to rent, and also offers some of the best returns for landlords with a 5.0% yield. However, both London and the North East have seen year-on-year rental falls, while Wales has seen improvements in landlord returns. YourMove report that the average rent in England and Wales was £850 in December 2017, an increase of 2.3% in the last 12 months, again different from the Index of Private Housing Rental Prices from the ONS.

Martyn Alderton, National Lettings Director for letting agents Your Move and Reeds Rain, comments:

“The rental market in England and Wales ended 2017 on a positive note for landlords, with rents, overall up 2.3% compared to a year ago, and average yields across the country at 4.4%. However, behind these figures lie fluctuations particularly in relation to the fall in average rents in London and strong growth in average rents in other regions.”

“In many ways, the rebalancing of the rental market across the country should be seen as a good thing as demand spreads to other areas and keeps the market robust. London still remains one of the most popular and expensive places to rent, yet we are now seeing strong growth in demand for rental properties in the regions around the capital.”


Comment from the RLA

David Smith, Policy Director of the RLA, commented on the latest Government Rental Statistics:

“Today’s figures show that rent controls are unnecessary and would act against the interests of tenants by making them worse off. Rent rises would be even lower if it was not for the punitive tax increases which the Government has imposed on the sector and which will begin to bite far more over the coming years.”