PEARL Rental Index – January 2017
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.
- Rental price growth weakening for Great Britain, with the latest rental index showing rents had increased by 1.2% in the 12 months to December 2017
- Wales rental growth continuing to strengthen with rental price growth now at 1.7%
- Consumer Price Index inflation now 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 1.2% in the 12 months to December 2017. This figure is down from the previous month of 1.4% and down from 1.8% for the year to August 2017. The rental growth for the year to December 2017 is the lowest annual growth recorded since the IPHRP began in 2012.
Across Great Britain there were varying rental price changes in the 12-month rate to December 2017:
- England rental prices grew by 1.3%
- Wales rental prices grew by 1.7%
- Scotland rental prices grew by 0.4%
- London rental prices grew by 0.4%
The rental index shows that rental price growth for Great Britain, England and London are continuing to slow. With the slow-down in private rental prices in Great Britain being driven by the London market.
2017 has seen a dynamic uplift in the Welsh rental market with a strengthening in rental price growth and is now out-performing England and London, with solid price growth since November 2016.
In Scotland, rental price growth has weakened since June 2015 and has remained around 0.2 – 0.4% growth since June 2017.
Growth in rents in London has decreased significantly over the past two years, in November 2015, growth was at 4.1%, it is now 3.7 percentage points below this figure. London rental growth is 0.9 percentage points below rental growth in Great Britain and is now 0.2 percentage points down from the previous month. If this trend continues, we could expect rental growth to turn negative in the next few months.
At a regional level in England, the regions with the most substantial increase in rents to December 2017 were:
- East Midland rental prices grew by 2.6%
- East of England rental prices grew by 2.2%
- South West rental prices grew by 2.1%
The regions with the lowest annual increases in rental prices were:
- North East with rental growth of 0.1%
- London with rental growth of 0.4%
- North West with rental growth of 1.3%
Consumer Prices Index (CPI)
The Consumer Prices Index 12-month rate was at 3.0% for December 2017. This was down from 3.1% in November 2017. In comparison to rental growth and the IPHRP rental index for Great Britain, inflation was 1.8 percentage points higher than private rental growth.
House Price Index
In the year to November 2017, average house prices in the UK increased by 5.1%, down from 5.4% in October 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 November 2017 was the following:
- England house prices grew by 5.3%, with the average house price now at £243,339
- Wales house prices grew by 4.5%, with the average house price now at £152,855
- Scotland house prices grew by 3.7%, with the average house prices now at £145,992
- Northern Ireland prices grew by 6.0%%, with the average house prices now at £132,169
In England, the strongest regional house price growth in the year to November 2017 was in:
- West Midlands (7.2%)
- East Midlands (6.4%)
- North West (6.2%)
- South West (6.2%)
The weakest house price growth was in London at 2.3%, followed by the North East at 2.3%, and then followed by Yorkshire and the Humber at 3%.
The property type that has experienced the greatest price growth was Semi-detached properties at 5.8% for the year to November 2017, with the average house price at £201,403. The property type with the weakest price growth was Flat or maisonette at 4.1% for the year to November 2017, with the average price at £203,651.
The latest data from the HM Land Registry is showing that house sales have continued to decrease in comparison to the previous year. In England, house sales were down 15% in September 2017 in comparison to the previous year. A decrease in house sales was also evident in Scotland and Wales, at 3% and 7% respectively. Showing a decline in housing transactions across the country.
Average Weekly Earnings
In the year to November 2017, Average Weekly Earnings (AWE) Regular Pay increased by 2.4%, with average weekly earnings now at £480.
Buy-to-Let Mortgage Activity
Buy-to-let lending in November declined 1.5% for new purchases month-on-month. Nevertheless, buy-to-let lending for new house purchases has remained relatively unchanged since October 2016, with lending hovering between 5,900 and 6,400 loans. Remortgaging is currently driving buy-to-let lending activity, with 13,500 remortgages in November 2017, this is 3.6% down month-on-month, and 4.5 percent down year-on-year. Overall, this shows that the number of buy-to-let mortgages for new house purchases has not recovered from the Stamp Duty changes, and are well below the figure for May 2013 (at 6,900).
PRS Evidence Dashboard Update
In January there were updates to the following data-sets and indices:
- Index of Private Housing Rental Prices (IPHRP)
- House Price Index
- Average Weekly Earnings
- Mortgage Activity (Value & Number of Buy-to-let mortgages)
You can find the updated statistics displayed on our PRS Evidence Dashboard here.
Updates from across the sector
Royal Institution of Chartered Surveyors
The latest RICS UK Residential Market Survey for December 2017 indicates that the changes to Stamp Duty for first-time buyers are having a very little impact. In addition, activity in the UK housing market is continuing to drop with respondents identifying a decline in demand in December. Over the next three months, expectations of housing sales remained flat. However, more long-term outlooks are more optimistic. In the rental market, RICS identify that tenant demand has continued to fall during December, and the number of new landlord instructions also declined.
Simon Rubinsohn, RICS Chief Economist, commented:
“The initial feedback from the market doesn’t suggest that the change in the Stamp Duty regime announced in the budget is going to have a material impact on activity. Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first-time buyer.
Meanwhile, the latest RICS data continues to highlight the importance of disaggregating the headlines numbers when talking about the market. Challenges over affordability may have grown across the UK but they are clearly having a bigger impact in some parts of the country than others. This is clearly evident in the sales expectations figures which still remain in positive territory in more than half of the areas surveyed in the report.”
The latest ARLA UK Private Rented Sector Report for November 2017 is showing that the number of tenants seeing rent increases is at an all-time low, the supply of properties available to rent rose for the first time since July, and void periods have increased to the longest period for three years. Only, 16% of agents reported landlords increasing rents, down from 22% in October and 27% in September. Void periods have now increased to four weeks.
David Cox, Chief Executive, commented:
“Consumer inflation hit a near six-year high last week, showing that the cost of living continues to rise for many. It’s therefore promising that despite this, the number of tenants having their rents increased has fallen over the last few months, demand has decreased, and the supply of rental stock is up. Looking to 2018 however, our members expect the supply of rental stock to fall, and rents to rise. The past few years have seen landlords inundated with various new laws and legislation and ultimately, it’s driving them out of the market and reducing rental stock. If we want to achieve equilibrium in the market, we simply need to increase stock.”
Your Move – Buy-to-Let Index
The latest Buy-to-Let Index from Your-Move for November 2017 shows that rental prices in the East of England rose faster than anywhere else in the year to October. Furthermore, prices in most areas of England and Wales grew in the last 12 months, although it was the East that saw the biggest increases. On a non-seasonally adjusted basis, the average rent was £924 per calendar month across all of England and Wales. When looking on a seasonally adjusted basis, average rent was £845 this month and 2.4% higher than the same point a year ago.
Some interesting news for Landlords is that Your Move found that the typical yield remained flat between September and October, this meant the average yield remained at 4.4%. The region with the highest yield was the North East at 5.1% followed by the North West at 5%.
Martyn Alderton, National Lettings Director for letting agents Your Move and Reeds Rain, comments:
“As we approach winter, the heat has been taken out of the rental market and price growth has slowed.”
“While prices in most areas have continued to rise, it has been at a slower pace than we had been used to in recent years.”
“Across England and Wales, rents have grown by 2.4% in the last year although some areas, such as the East of England, have performed above that level.”
Right Move – Rental Price Tracker
The Right Move Rental Price Tracker identified that the pace of annual rent rises now lowest since 2014. 0.7% annual rate of increase in national asking rents (excluding London) in 2017, the lowest since 2014. Asking rents in London ended the year 1.2% higher than at the end of 2016, the first time the annual rate in the capital has been in positive territory in nearly two years. The South East and Yorkshire and the Humber are the only two regions to end 2017 with asking rents down, while the North East saw rents rising at the highest rate, up 3.3% on 2016.