PEARL Rental Index – June 2018
PEARL Rental Index: June 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.
- Rental price growth in Great Britain remained unchanged from April 2018, with rents increasing by 1.0% in the 12 months to May 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 May 2018. This is the first decline since September 2010,
- Consumer Price Index inflation now at 2.4%, unchanged from the previous month,
- Buy-to-let remortgaging up 32.4% on the previous month as landlords prepare for another interest rate rise,
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 May 2018. This figure has remained unchanged compared to the previous month but 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 May 2018:
- England rental prices grew by 1.0%
- Wales rental prices grew by 1.2%
- 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 prices are now decreasing, if the current trend continues this decrease in prices will continue. 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 and is now 0.2 percentage points down from the previous month. 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 February 2017 were:
- East Midland rental prices grew by 2.9%
- East of England rental prices grew by 2.0%
- South West rental prices grew by 2.0%
The regions with the lowest annual increases in rental prices were:
- London with rental growth of -0.2%
- North East with rental growth of 0.1%
- North West with rental growth of 1.1%
Consumer Prices Index (CPI)
The Consumer Prices Index 12-month rate was at 2.4% for May 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 April 2018, Average Weekly Earnings (AWE) Regular Pay increased by 2.8%, with average weekly earnings now at £484.
House Price Index
In the year to April 2018 , average house prices in the UK increased by 3.9%, 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 April 2018 was the following:
- England house prices grew by 3.7%, with the average house price now at £243,639
- Wales house prices grew by 4.4%, with the average house price now at £156,495
- Scotland house prices grew by 5.6%, with the average house prices now at £148,952
- 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 April 2018 were in:
- South West (6.1%)
- West Midlands (5.9%)
- East Midlands (4.8%)
The weakest house price growth was in:
- London (1%)
- North West (2.4%)
- East of England (2.5%)
The property type that has experienced the greatest price growth was Semi-detached properties at 5.3% for the year to April 2018, with the average house price at £214,717. The property type with the weakest price growth was Flat or maisonette at 1.0% for the year to April 2018, with the average price at £202,052.
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 February 2018 in comparison to the previous year. Wales has also experienced a decline in the number of sales, and is down 8.6% in February 2018 in comparison to February 2017, and Scotland is down 9.1%. For the whole of the UK, the number of property transactions completed fell by 16.8% for February 2018 in comparison to February 2017, in comparison to the previous month (January 2018), the number of property transactions fell by 4.9%.
Buy-to-Let Mortgage Activity
Buy-to-let lending in April 2018 declined 5.7% for new house purchases year-on-year. This was also a decline of 12.5% in the value of new lending for new house purchases year-on-year.
Remortgaging is currently driving buy-to-let lending activity, with 14,300 remortgages in April 2018, this is 32.4% percent up year-on-year. The value of remortgaging for new loans was up 35.3% 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).
Stamp Duty Land Tax Revenue
The latest figures for the Stamp Duty Land Tax revenue collected by HMRC is showing that there has been a 9% drop in net revenue for residential property for Q1 2018 in comparison to Q1 2017. In contrast to the previous quarter however, there has been a 25% drop in net revenue for the Government in comparison to Q4 2017. This is not surprising since there were 27% less transactions in the first quarter of 2018 in comparison to the last quarter of 2017.
PRS Evidence Dashboard Update
In June 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 May 2018 indicates that there has been an upturn in supply of new homes, yet demand is still declining, yet at a lower rate. In regards to the rental market, demand for properties from tenants is reported to be unchanged, yet supply from landlords is continuing to decline. RICS forecast that due to the lack in supply of properties that this is likely to put upward pressure on rents.
Simon Rubinsohn, RICS Chief Economist, commented:
“Although agents are suggesting that a little more supply may have come onto the market in May, some of it from the Buy to Let sector, inventory levels still remain near historic lows. Indeed, with the run rate on appraisals continuing to track below the numbers of a year ago it is premature to conclude that a sustained upturn in available stock is imminent.
Against this backdrop, it is likely that the headline picture regarding activity in the housing market will remain subdued for some months to come. This is reflected in the feedback to the latest survey which shows sales expectations only marginally positive on a one-year view.”
The latest ARLA UK Private Rented Sector Report for April 2018 found that letting agents reported a rise in the number of landlords selling properties and leaving the sector. At the same time, the number of tenants looking for a new home to rent has increased by 9%. For rents, 26% of tenants experienced increases to their rent, up two percentage points in comparison to April 2017.
David Cox, Chief Executive, commented:
“The barrage of legislative changes landlords have faced over the past few years, combined with political uncertainty has meant the BTL market is becoming increasingly unattractive to investors. Landlords are either hiking rents for tenants or choosing to exit the market altogether to avoid facing the increased costs incurred. This in turn is hitting renters most, at a time when a huge number of people rely on the rented sector, and leaves us with the question of where will these people find alternative homes?
As demand for private rented homes massively continues to outstrip supply, the Government can no longer divert its attention from the broken housing market. The recent news that the Government is regulating the industry is a step in the right direction, but ultimately we just need more homes.”
UK Finance’s latest Mortgage Trends Update reveals there was strong growth in remortgaging in April 2018, with new homeowner mortgages up 36 per cent and buy-to-let remortgages up 32.4 per cent compared to the same month a year earlier.
Commenting on the data, Jackie Bennett, Director of Mortgages at UK Finance, said:
“Remortgaging activity bounced back to strong levels in April, as both homeowners and landlords put their house in order by locking into attractive fixed-rate deals ahead of an anticipated interest rate rise.
“This spike in remortgaging was also driven by a large number of fixed-term mortgage deal rates coming to an end, combined with increased efforts by lenders to contact their customers before their deal rate expires.
“The number of first-time buyers has grown year on year, outstripping the number of homemovers. This may reflect the impact of measures such as the recent stamp duty cut and the Help to Buy scheme that are focused on getting more people onto the housing ladder.”
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:
“The findings are showing a slow-down in the housing market right across England, with sellers, investors and buyers losing confidence. This is likely linked to the economic and political uncertainty the country is experiencing. Property transactions are decreasing, and buy-to-let lending for new purchases continues to decline. ARLA data is showing that demand is outstripping the supply of privately rented homes. The Government needs to take a positive stance towards the private rented sector and support the evolution of the sector into a modern rented sector that works for all. Without this it is unlikely that the needed additional 2 million homes to rent will be available, seriously exacerbating the housing crisis.”