PRS Statistics Bulletin – November 2017

by | Nov 15, 2017 | Blog post, Statistics Bulletin

Welcome to the November PRS Statistics Bulletin from the RLA Private renting Evidence, Analysis and Research Lab (PEARL). We have rounded up all of the latest housing statistics and data updates from across the private rented sector and compiled them into one easy to digest bulletin.

PRS Evidence Dashboard Update

In November 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)
  • The latest quarterly Landlord Possession data from the Ministry of Justice

You can find the updated statistics displayed on our PRS Evidence Dashboard here.

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 1.6% in the 12 months to October 2017. This figure is down on the previous month of 1.6%, and 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 October 2017:

  • England rental prices grew by 1.5%
  • Wales rental prices grew by 1.5%
  • Scotland rental prices grew by 0.4%
  • London rental prices grew by 0.8%

Rental price growth for Great Britain, England and London have all contiued to slow. However, rental price growth has strengthened in Wales, which has seen strong rental price growth since November 2016 in comparison to Scotland.

Great Britain and the countries within have all experienced rental price growth since 2011, however, rental prices have grown more in England than in Scotland and Wales. In Scotland, rental price growth has weakened since June 2015 and has remained near to 0% growth since August 2016. While Wales has experienced stronger rental price growth since November 2016, rental price growth in Wales remains unchanged at 1.3% for the second consecutive month.

The latest data is indicating a slowdown of rental prices across Great Britain since 2015, and this slowdown is being driven by the London market. With prices in London is 0.7 percentage points below that of Great Britain. Rental price growth in London has continued to slow and is now 0.1 percetnage points down from the previous month. RICS is continuing to have a negative forecast for rental price growth, so we should expect the London rental slow-down to continue.

At a regional level in England, the regions with the largest increase in rents to October 2017 were:

  • East Midland rental prices grew by 2.9%
  • South East rental prices grew by 2.4%
  • East of England rental prices grew by 2.1%

In comparison, the weakest regional rental growth was in the North East with rental growth of 0.2%, folowed by London with rental growth of 0.8%, and then followed by the North West with rental growth of 1.3%.

Consumer Prices Index (CPI)

The Consumer Prices Index 12-month rate remains unchanged for October 2017 at 3%. In comparison to the IPHRP for Great Britain, inflation increased by 1.4 percentage points more than private rents for the year until October 2017.

 

House Price Index

In the year to September 2017, average house prices in the UK increased by 5.4%, up from 4.8% for August 2017. UK house price growth has slowed since June 2016 (from 8.2%) and has now stabilized at around 5% for 2017 so far. Growth in UK house prices was contributed mostly from growth in England. Across the UK, house price change for the year to September 2017 was the following:

  • England house prices grew by 5.7%, with the average house price now at £243,945
  • Wales house prices grew by 5.3%, with the average house price now at £152,661
  • Scotland house prices grew by 3.1%, with the average house prices now at £144,924
  • Northern Ireland prices grew by 6.0%, with the average house prices now at £132,169

In England, the strongest regional house price growth was in the North West at 7.3% for the year to September 2017, followed by the South West at 6.6%, and then the East Midlands at 6.4%. The weakest house price growth was in London at 2.5%, followed by the North East at 4.4%, and then the South East at 5.5%.

The region with the highest average house value for September 2017 was London at £483,568, followed by the South East at £324,465, and then the East of England at £289,301. The region with the lowest average house value for September 2017 was the North East at £130,271.

The property type that had experienced the greatest price growth was Detached properties at 5.8% for the year to September 2017, with the average house price at £341,941. The property type with the weakest price growth was Flat or maisonette at 4.7% for the year to September 2017, with the average price at £203,388.

House Price Sales

The latest data from the ONS is showing that house price sales have continued to decrease in comparison to the previous year. In England, house price sales were down 17% in July 2017 in comparison to the previous year, and down 28% in comparison to July 2015. Along with the lower house price growth and rental price growth this is showing a significant slow-down in the housing market.

Average Weekly Earnings

In the year to September 2017, Average Weekly Earnings (AWE) Regular Pay increased by 2.2%, with average weekly earnings now at £477 unchanged from the previous month.

Buy-to-Let Mortgage Activity

Buy-to-let lending in September declined 2% for new purchases month-on-month, however, was up 3% on the previous year. 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. 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 number for May 2013 (at 6,900). Remortgaging is currently driving buy-to-let lending activity, with 12,700 remortgages in September 2017. This is 9% higher year-on-year, however, is 2% down month-on-month, showing a slight slow down in remortgaging activity since July 2017.

 

The buy-to-let lending activity is demonstrating significant trends and indicates that the stamp duty changes have hampered the previous strong growth in the private rented sector. This could limit the future supply of private rented properties, reducing supply for tenants and could potentially lead to increased competition in the market.

Updates from across the sector

Royal Institution of Chartered Surveyors

The latest RICS UK Residential Market Survey for October 2017 indicates that demand and supply of housing is weakening.  Near-term price expectations remain negative and have been negative for the past 3 months. New Buyer Enquiries and agreed sales continue to be reported as weakening.  In relation to the private rented sector, tenant demand has remained flat, while new landlord instructions have continued to fall. However, RICS are indicating that predictions for rental price growth are positive for the next three months and that rents over the next 5 years should increase on average by 3.5% per year.

Simon Rubinsohn, RICS Chief Economist commented:

“The combination of the increased cost of moving, a lack of fresh stock coming to the market, uncertainly over the political climate and now an interest rate hike appears to be taking its toll on activity in the housing market. With both buyer enquiries slipping and sales expectations also subdued, the sense is that home owners are staying put and first time purchasers are increasingly focusing on that part of the market supported by the Help to Buy incentive. A stagnant second-hand market is bad news for the wider economy, not just in terms of spending but also because it restricts mobility.

Prices do now seem under pressure at the more expensive end of the market with a further rise in the number of properties transacting at below the asking price. But it is important to not characterise the whole of the market by what is happening in parts of London and the wider South-East.”

ARLA PropertyMark

The latest ARLA UK Private Rented Sector Report for September 2017 is showing that demand for rental properties is up by 10 per cent month on month, while the proportion of tenants who faced rent increases dropped by 8 percentage points month on month to 27%. In comparison to year-on-year, rental price increases is up by 3 percentage points.

David Cox, Chief Executive commented:

“Last week’s consumer price index (CPI) showed that inflation rose to 2.8% in September, up from 2.7% in August. As the cost of living increases, the last thing tenants need is for their rents to rise, so while it’s great that month on month we’re finally seeing a decrease in the number of landlords hiking costs, we need to look at the bigger picture. There are still more than a quarter of tenants experiencing rent hikes every month – and that’s too high.

As summer drew to a close in September, demand increased in line with our expectations, and while it’s too soon to see the effect of this on rent costs, we know that when supply and demand are conflicting, rent prices will just continue to rise.”

Countrywide Letting Index

The October 2017 index from Countrywide is showing that rental prices in October grew by 0.5%, much lower than the figures from the ONS in the Index of Private Housing Rental Prices. However, if you exclude London, where Countrywide reported negative growth, rental prices increased by 1.2% across Great Britain. An interesting finding from this index is that the number of cash buyers is increasing, with 78% of PRS homes bought in the North East bought with cash.

Comment from the RLA

Alan Ward Chairman of the RLA commented on the findings of this month’s RLA PEARL Statistics Bulletin:

“The government’s fiscal policy is a housing own-goal. It has not only turned off landlords, it has turned off house-builders from investing. Housing sales are down 17% year on year, new supply of properties is down, and buy-to-let mortgage activity continues to be flat. All of this is bad news and we need direct action by the Government in next week’s budget to encourage the supply of homes for families to rent and buy.”