PEARL Rental Index – May 2018

by May 23, 2018Blog post, Pearl Index, Rental Index

PEARL Rental Index: May 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 bulletin.

Headline findings:

  • Rental price growth weakening for Great Britain, with the latest rental index showing rents had increased by 1.0% in the 12 months to April 2018, down from 1.1% in March 2018
  • London rental price growth continuing to decline, with the latest rental index showing rents were unchanged, with a of 0.0% in the 12 months to April 2018
  • Consumer Price Index inflation now at 2.4%, down from 3% for January 2018
  • Review of Industry data and Index’s show that Government taxation and regulatory changes are dampening the growth of the Private Rented Sector

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 April 2018. This figure has remained flat 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 April 2018:

  • England rental prices grew by 1.0%
  • Wales rental prices grew by 1.3%
  • Scotland rental prices grew by 0.6%
  • London rental prices grew by 0.0%

The rental index shows that rental price growth for Great Britain, England and London are continuing to slow. This slow-down in private rental prices is being driven largely by the London Market. Rental price growth has been stronger in Wales than in the other constituent countries of the UK, with rental price growth of 1.3% in the 12-months to April 2018.

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 4.1 percentage points below this figure. Furthermore, London rental growth is 1 percentage points below rental growth across Great Britain and is now 0.1 percentage points down from the previous month. It is likely that if the trend for London continues that rental growth will turn negative over the next few months.

At a regional level in England, the regions with the most substantial increase in rents to April 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 1.8%

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

  • London with rental growth of 0.0%
  • North East with rental growth of 0.1%

Consumer Prices Index (CPI)

The Consumer Prices Index 12-month rate was at 2.4% for April 2018. This was down from 2.5% in March 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 March 2018, Average Weekly Earnings (AWE) Regular Pay increased by 3.0%, with average weekly earnings now at £484.

House Price Index

In the year to March 2018 , average house prices in the UK increased by 4.2%, 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 March 2018 was the following:

  • England house prices grew by 4.0%, with the average house price now at £240,949
  • Wales house prices grew by 3.5%, with the average house price now at £152,999
  • Scotland house prices grew by 6.7%, with the average house prices now at £146,009
  • 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 March 2018 were in:

  • East of England (5.8%)
  • East Midlands (5.6%)
  • North West (5.2%)

The weakest house price growth was in:

  • London (-0.7%)
  • North East (2.1%)
  • South East (3.3%)
The region with the highest average house value for March 2018 was London at £471,944, followed by the South East at £320,682, and then the East of England at £291,415. The region with the lowest average house value for March 2018 was the North East at £124,381.

The property type that has experienced the greatest price growth was Detached properties at 5.3% for the year to March 2018, with the average house price at £342,722. The property type with the weakest price growth was Flat or maisonette at 2.0% for the year to March 2018, with the average price at £200,157.

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 12% in January 2018 in comparison to the previous year. For the whole of the UK, the number of property transactions completed fell by 12.9% for January 2018 in comparison to January 2017, in comparison to the previous month (December 2017), the number of property transactions fell by 39.4%.

Buy-to-Let Mortgage Activity

Buy-to-let lending in March 2018 declined 1.9% for new house purchases year-on-year, while remortgaging was down 12% year-on-year. For buy-to-let lending, the number of new loans has declined by 19% on the previous year. Remortgaging continues to drive buy-to-let lending activity with 12,600 remortgages in March 2018, 0.8 percent up year-on-year. The UK Finance data continues to show that buy-to-let mortgages for new house purchases has not recovered from the Stamp Duty changes, are well below the figure for May 2013 (at 6,900), and the governments taxation policy has dampened the market.

PRS Evidence Dashboard Update

In May 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 April 2018 shows that the number of new buyer enquiries remains stabile after a decline trend. Despite the current figure, which is the most negative since November 2012, almost one-third more of RICS respondents (31%) positively anticipate higher house prices next year this time. Stability shows also in sales where marginal positive gains were made by positive net balance of 8%. The new instructions declined but only by 7%, which kept the estate agents’ books constant and marginally better than the record low February.

Simon Rubinsohn, the RICS Chief Economist, observed:

“The housing market typically tends to see a pick-up in activity at around this time of the year and the feedback from respondents to the latest survey does seem to be capturing this tone. However, once this seasonal pattern has been allowed for the underlying trend in transactions still remains broadly flat.

“Meanwhile, the impact of recent tax changes appears increasingly visible in the letting results with new instructions from landlords in the three months to end April falling again and at a faster pace than previously. Given what this says about the Buy to Let market at the present time, it is imperative that Build to Rent begins to take on a greater role to ensure those seeking to rent in private sector over the coming years have sufficient choice.”

ARLA PropertyMark

The latest ARLA UK Private Rented Sector Report for March 2018 shows that the rental homes availability for tenants increased by 2% instead of the fall of the previous month. At the same time however the demand grew by 8%. For the estate agents, the number of properties managed increased by 2% compared to February fall but still being lower than in March 2017. Rental property demand also increased by 8% from 61 to 66 new house-hunters per branch. In the price front the upward trend continues where rent prices increased to 23% from February 20% figure. Still the price rises are lower in retrospect where rent rises in March 2016 and 2015 was 32%.

David Cox, Chief Executive of ARLA PropertyMark commented:

“This month’s results very much show a ‘business as usual’ period for the private rented sector, but this isn’t necessarily a good thing. Supply is still too low and almost a quarter of tenants are experiencing rent hikes every month as landlords try to recoup the costs lost trying to keep on top of all the recent legislative changes – including the recent energy efficiency deadline. For the last two decades, successive Governments have passed significant amounts of complex legislation for landlords, none of which have been properly policed or adequately enforced – but most of which cost decent landlords a lot of money.

“This is why we’re so supportive of the Government’s proposals to crack down on rogue agents, and more recently, plans to confiscate properties from criminal landlords. The announcements mark a sensible shift towards focusing on the root cause of the issues affecting the sector, rather than trying to find solutions to individual problems. This, coupled with greater rental stock is the key to fixing Britain’s broken rental sector.”

Hamptons International Letting Index

The April 2018 index from Hamptons International is showing that since April 2016 when the stamp duty surcharge for second homeowners was introduced, the number of homes available to rent has fallen in the South, but stock levels have been more resilient in the North. Last month there were 19% more available homes to rent in the North than in April 2016, compared with -16% fewer homes available to rent in the South.

Since April 2016, landlords have sold 82,000 more homes than they bought in the South, compared to 24,000 net sales in the North. As a result, in April 2018 there were 5% fewer homes available to rent across Great Britain than in April 2016.

Commenting Aneisha Beveridge, Research Analyst at Hamptons International, said:

“Low stock levels in the South continue to drive rental growth as tenants compete for fewer available homes. Since April 2016, the month the stamp duty surcharge was introduced for second homeowners, landlords across Great Britain have sold 88,000 more homes than they bought. But landlords are finding new ways to maximise their returns by purchasing properties elsewhere, particularly further North in search of lower stamp duty bills and higher yields.”

UK Finance

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

“Remortgaging levels softened in March, after a busier than usual start to the year saw customer locking into attractive deals ahead of a potential interest rate rise.

“There has been relatively flat growth in lending to first-time buyers, reflecting recent Bank of England figures showing a fall in mortgage approvals.

“Meanwhile the buy-to-let market remains subdued, as recent tax and regulatory changes continue to have an impact on demand.”

Analysis and comment from the RLA

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

“The latest data and comment from across the sector is showing that the government’s tax and regulatory changes are dampening the growth of the Private Rented Sector. Buy-to-let lending is down on the previous year and RICS reporting new instructions declining. If the sector is to meet the demand for an additional 2 million properties by 2025 as predicted by PwC, then positive changes by the Government will be needed to support landlords. But, the overall housing market is subdued, with house sales down by 39% in comparison to the previous month and new house purchases down by 1.9% year-on-year.

“However, there is good news for tenants, with average weekly earnings increasing a lot faster than rents across Great Britain. In the short-term this will provide relief over past stagnant wage growth and if this continues in the long-term will support renters to save more for deposits.”