PEARL Rental Index July 2018

by Jul 25, 2018Blog post, Pearl Index, Rental Index

PEARL Rental Index: July 2018

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 monthly bulletin.

Headline findings:

  • Rental price growth in Great Britain remained unchanged from April 2018, with rents increasing by 1.0% in the 12 months to June 2018,
  • London rental price growth continuing to decline, with the latest rental index showing rents have decreased by 0.2% in the 12 months to June 2018. This is the first decline since September 2010,
  • Consumer Price Index inflation now at 2.4%, unchanged from the previous month,

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 1.0% in the 12 months to June 2018. This figure has remained unchangedsinceApril 2018, and it is down from 1.8% for the year to August 2017. Across Great Britain there were varying rental price changes in the 12-month rate to June 2018:

  • England rental prices grew by 1.0%
  • Wales rental prices grew by 1.1%
  • Scotland rental prices grew by 0.6%
  • London rental prices decreased by 0.2%

The data is showing that the slow-down in the London market is continuing to decline and rental prices have decreased for two consecutive months. The rental index is also showing that the Great Britain and England figures are continuing to slow, but this slow-down is being driven largely by the London Market. Wales rental growth has continued to be stronger than the other constituent countries of the UK.

The London Market has experienced a significant slow-down in rental price growth over the past two years. In November 2015, rental prices were growing at 4.1%, it is now 4.3 percentage points below this figure. Furthermore, London rental growth is 1.2 percentage points below rental growth across Great Britain. It is likely that if the trend for London continues that rental growth will continue to be negative over the next few months.

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

  • East Midland rental prices grew by 2.8%
  • 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:

  • London with rental growth of -0.2%
  • North East with rental growth of 0.2%
  • North West with rental growth of 1.1%

Consumer Prices Index (CPI)

The Consumer Prices Index 12-month rate was at 2.4% for June 2018. This was unchanged from the previous month and down from 3% in January 2018. In comparison to rental growth and the IPHRP rental index for Great Britain, inflation was 1.4 percentage points higher than private rental growth.

Average Weekly Earnings

In the year to May 2018, Average Weekly Earnings (AWE) Regular Pay increased by 2.6%, with average weekly earnings now at £486.

House Price Index

In the year to May 2018, average house prices in the UK increased by 3%, down from 5.2% in the year to December 2017. UK house price growth has been slowing since June 2016, where it was 8.2%. Growth in UK house prices was contributed mostly to growth in England. Across the UK, house price change for the year to May 2018 was the following:

  • England house prices grew by 2.9%, with the average house price now at £243,583
  • Wales house prices grew by 1.0%, with the average house price now at £148,894
  • Scotland house prices grew by 4.9%, with the average house prices now at £149,004
  • Northern Ireland prices grew by 4.2%, with the average house prices now at £130,026

In England, the strongest regional house price growth in the year to May 2018 was in:

  • East Midlands (6.3%)
  • West Midlands (5%)
  • South West (3.9%)

The weakest house price growth was in:

  • London (-0.4%)
  • North East (1.3%)
  • South East (2.2%)
The region with the highest average house value for May 2018 was London at £478,853, followed by the South East at £322,096, and then the East of England at £288,808. The region with the lowest average house value for May 2018 was the North East at £128,680.

The property type that has experienced the greatest price growth was Detached properties at 4.6% for the year to May 2018, with the average house price at £328,607. The property type with the weakest price growth was Flat or maisonette at 0% for the year to May 2018, with the average price at £202,696.

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 England, house sales were down 22% in March 2018 in comparison to the previous year. Wales has also experienced a decline in the number of sales and is down 13.8% in March 2018 in comparison to March 2017, and Scotland is down 16.1%. For the whole of the UK, the number of property transactions completed fell by 20.3% for March 2018 in comparison to March 2017.

Buy-to-Let Mortgage Activity

Buy-to-let lending in May 2018 declined 9.8% for new house purchases year-on-year. This was also a decline of 22.2% in the value of new lending for new house purchases year-on-year.

Remortgaging is currently driving buy-to-let lending activity, with 14,600 remortgages in May 2018, this is 15% up year-on-year. The value of remortgaging for new loans was up 21.1% year-on-year and stood at £2.3bn.

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 June 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)

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 June 2018 indicates that the residential market will continue being subdued in the near to short term. The report is showing that new sales are continuing to decline and this is likely to continue, while at the same time the proportion of new buyer enquiries remained flat, suggesting that there is little appetite for new home purchases. In regards to the rental market,RICS are reporting that there are not enough rental properties coming to the market and this is likely to have an upward pressure on rents.

Simon Rubinsohn, RICS Chief Economist, commented:

“It is hard to see what is going to provide much impetus for activity in the housing market in the near term. Meanwhile the on-going challenges around lifting the delivery pipeline, reflected in last week’s disappointing data on housing starts, is captured in the suspicion in the survey that prices are likely to resume an upward course over the coming year. The challenge is also visible in the response of the private lettings market to change to the tax treatment on investment properties. While it is understandable that the government wanted to provide a lift for first time buyers, this may well come at the cost of higher rents as the appeal of buy to let diminishes.”

ARLA PropertyMark

The latest ARLA UK Private Rented Sector Report for May 2018 found that the number of landlords selling properties and leaving the sector remained flat on the previous month.  At the same time, the number of tenants experiencing rent hikes increased to 28 per cent in May, up from 26 per cent in April.

David Cox, Chief Executive, commented:


“There’s a chronic supply shortage in the rental market at the moment, and while it’s positive that the number of properties available to rent seems to be rising, this is just a drop in the ocean; it isn’t nearly enough to fix the market for tenants. Competition is getting more and more fierce, and with legislative changes hitting landlords from all sides, the cost of renting is only increasing.

“The Government’s recent announcement around licensing changes for landlords is a prime example; licensing doesn’t work and it never has done. It means councils will spend time and energy administering schemes, rather than concentrating on increasing housing stock in their areas and enforcing against rogue, criminal landlords. Coupled with the gradual removal of mortgage interest relief, new energy standards for landlords and the ever-increasing fees for these schemes, landlords are being expected to bear more and more costs; which is probably why the number of landlords leaving the market has remained at the all-time high we saw last month. We’re all striving for the same end goal of improving the private rental sector for consumers, but the only thing which will truly create a better – fairer – market, is a dramatic increase in supply.”

UK Finance

UK Finance’s latest Mortgage Trends Update shows that the have been increases in first-time buyer and new home purchases while remortgaging continues the strong upward trend.

Commenting on the data, Jackie Bennett, Director of Mortgages at UK Finance, said:

“The mortgage market is seeing a pre-summer boost, driven by a rise in the number of first-time buyers and strong remortgaging activity. It is also particularly encouraging to see an increase in home movers, after a period of relative sluggishness in this important segment of the market.

“However, affordability remains a challenge for some prospective buyers, and this is reflected by a gradual increase in loan to income multiples.

“Meanwhile purchases in the buy-to-let market continue to be constrained by recent regulatory and tax changes, the full impact of which have yet to be fully felt.”


Analysis and comment from the RLA

Dr Tom Simcock, Senior Researcher for the RLA commented on the findings of this month’s RLA PEARL Rental Index:

“All of the data is showing that the government’s tax changes are constraining the private rented sector. Tenant demand is increasing, while there is a slow-down in the number of new properties entering the market. This is likely to affect hard-working families right across the country. We need tenure-neutral housing policies that support the delivery of housing right across the UK, rather than penalising the private rented sector.”