NRLA RESEARCH Observatory

Growth & PRS Prices

  • In the previous quarter, analysis focused on the “bumpy growth path” on whih the economy had found itself on.  GDP for the final quarter last year showed zero growth.
  • There was concern at the time that the economy could go into negative growth. 
  • However, the economy plunged as the coronavirus took a grip –  the economy contracted by 2% in this quarter.
  • This meant there has been a 1.6% reduction in the size of the economy over the past year.
  • Lockdown had only just begun by the time the quarter ended. It is highly possible the economy will tip into recession. 
  • Note that GDP data is always subject to ongoing revision – the data in the chart presented above will, in all probability be adjusted before 2020 Q2 data is announced. 
  • You can read more about the current performance of the UK economy and the data revisions here.  

The table above focuses on price changes in the economy since 2016.  It shows three different measures of price change. Firstly, the Consumer Price Index (favoured by economists as the measure of overall price change in the economy). Secondly the CPIH which factors in the hosuing costs of owner occupiers. Finally the chart shows the Index of Private Housing Rental Prices (IPHRP) – an index tracking the prices paid for renting property from private landlords in the UK.

Like other price indices, this latter data set is compiled by the ONS. It is the best available measure of housing costs in the Private Rented Sector amongst both new and existing tenants.

In April, the IPHRP index rose to 109 – meaning UK rental prices in the private sector have grown 9% since January 2015 (the base period for the index). It was the only index of the three to rise in April.

Though not shown here, the annual rate of change of the IPHRP was significantly above that of the other two indices. The IPHRP for the twelve months to April remained at 1.4%. For the CPI and CPIH, annual growth fell – to 0.8% and 0.9% respectively. 

It should be noted that annual growth in the IPHRP has lagged the other two indices for 14 of the 15 months previous to April.  April may simply be a product of the coronavirus rather than any clear market trend. 

  • For more detail on these specific figures. Please see the ONS web site here
  • The IPHRP (Index of Private Housing Rental Prices) is “an experimental price index tracking the prices paid for renting property from private landlords in the United Kingdom.” (ONS). For more information on why the IPHRP should be the go-to measure of rental price change see this article here.

This chart shows the growth in real wages (allowing for inflation) against the growth in the IPHRP. 

The index of real wages grew noticably between Feb 2018 and the summer of 2019.  Since the autumn however the growth in real wages hasstalled quite noticably, particularly since the turn of the year, but clearly accelerated in March – the final week of which saw the economy lock-down with the coronovirus. 

In March real wage growth was 0%. This is the lowest level of real growth since June 2018 when annual real wages declined.   – ie 1.4% above the rate of inflation (CPI), but in February was just 0.8%. This is the lowest annual growth since March 2019.  In fact, aprat from that March 2019 level, this is the lowest level of wage growth the GB economy has experienced for eighteen months.

Following a period in which the gap between real wages and rental prices narrowed, it is clear that gap in 2020 is now widening.  

[Note that in this chart, wages are at a GB level, but we selected IPHRP on a UK-wide statistic. This is simply because the two data series have a common base year.]

Lending & Housebuilding

  • The chart shows how the buy to let market drove UK residential loans until 2015 – the proportion of buy-to-lets growing in a market recovering slowly from the Global Financial Crisis.
  • However, following the peak in 2016 (as a result of announced tax changes) there has been a noticeable decline in buy-to-lets as a proportion of lending.
  • This has now become a clear downward trend – notice the declining peaks in Q1 2016 (BTL lending 21.4% of all new residential loans to individuals); Q1 2017 (14.7%); Q1 2018 (14.3%) and Q1 2019 (14.0%).
  • This trend is emphasised by the presence of lower consecutive lows from 2016 onwards.  Note that the Q3 & Q4 data for 2019 did not make a new lower low, although the down trend cannot yet be said to be broken.
  • In Quarter 4, 2019 – the most recent quarter for which data is available, 12.4% of residential loans to individuals were for the “buy-to-let” market. It is noticable that Q3 and Q4 tend to be the strongest quarters for lending. In 2019 the money value of lending was around the same levels as for 2018
  • Follow this link for more analysis of this data.

The above chart highlights how crucial the PRS is in the supply of homes, with slowly growing volumes of dwelling completions. Meanwhile,  there has been a decline in the proportion of dwelling completions intended for social  housing.  That said, the data for Qtr 4, 2019 WAS encouraging 

  • Private dwelling completions in Qtr 4 was just under 50,000. This is the highest number of completions this century.
  • Social housing volumes – of which Housing Association completions make up the bulk of completions – also grew. The 10,000 social housing completions in Qtr 4 was the highest quarterly number of completions since at least the turn of the century (when our coverage of this data began).

 

The pattern of dwelling completions in Wales shows a combination of: 

Low – and declining – volumes of house completions:

  • The 21st Century peak for Wales was in 2006/07 (not shown) when housing volumes was just over 9,300 completions for the year: for the last year volume was just 60% of that level.

Low numbers of social housing completions:

  • Though volumes of social housing completions are growing – and are actually at a 21st century high – social housing dwellings are being built at a level of just over 1,200 units per annum. 
  • Note that since 2000/01, just 345 local authority built dwellings have been completed in Wales.

PRS Households

  • This chart shows the growth experienced by the PRS  – and the present levelling off of that growth trend.

  • In 2017, 19.4% of GB households were in the PRS. 
  • In Scotland, the proportion of households in the PRS has doubled in the period set out in the graph.  There has however been a slight dip (one-tenth of a percentage point) in 2017 compared to 2016.
  • In England & Wales, the most recent figures (2017) show a small dip in the proportion of PRS households when compared to 2015.
  • These figures – from the Ministry of Housing – demostrate a pattern which is consistent across datasets when considering GB/UK as a whole, even though when considering each nation state as a seperate entity the pattern of tenure varies.
  • There is an acceleration in the proportion of households in the Private Rented Sector through the early part of this century.
  • Note however since 2013/2014 the growth of the PRS has slowed down: In 2017 the propotion of households in the PRS fell year-on-year for the first time in the period covered by the chart.
  • That fall is only slight –  from 19.7% of households to 19.4%. Using the methodology here, in 2017 there were 5,414,000 households in the PRS in 2017.
  • (As a final point note that the basis of how dwelling stock by tenure has been calculated has been improved – this means however there should be caution when looking at earlier years)

PRS rent levels

The above shows the median weekly rent levels in the PRS for the most recent two years. This data is published annually. 

It highlights that the last twelve months have been a period when the reality of rent change have been somewhat at odds with the perception:

Overall, across the median average rent grew by just £1 between the two years.

Rents grew in England by a median average of £5 per week. In Wales median rents fell by £5 per week.    

  • The chart above shows that low levels of rent increases, even in England, are really now the norm.
  • In England, median rents over the last eight years have increased by just 1.8%pa on average.
  • Even this modest growth is way ahead of that experienced in Scotland and Northern Ireland.
  • In Wales, rents have fallen in money terms, let alone real terms.
  • The reality is that, for many landlords, financial returms as measured by rental growth over the last seven years has barely been equal to that of a long term savings bond.  

regional PRS data

  • Note the differential between rent levels in the London region and elsewhere – rents in London are twice the England average.
  • The North East is the English region with the lowest median weekly rent – £105pw. 
  • Over the twelve months prior to the production of these statistics, rent growth (not shown) has been modest – reflecting the ONS data which is produced through a different methodology: 
  1.  Across the UK as a whole, growth in median weekly rents was just 0.7%.
  2. Virtually of the growth could be put down to rental growth in England.  
  3. In Wales median weekly rents fell by over 4% (4.6%).
  • This chart shows the annual growth rate in the IPHRP for March & April. 
  • In England, the IPHRP increased to 1.5%. That is rental prices in the sector – for both new and existing tenants – grew 1.5% in the twelve months to April 2020.  
  • In Wales however private rental price growth rolled back from 1.2% in March to just 1.0% for April.
  • The South East expereinced the third consecutive monthly decrease in price growth (now down to just 1.0% growth pa). 
  • In the South West, rental price growth continues to be the highest in England. Rental price growth in this region has been over 2.0%pa for each month since May 2019.  In the East Midlands, rental price growth has been above 2.0%pa for thirteen of the last sixteen months. 

Possession claims

  • Since 2005 private landlord claims have risen,  2019 saw the largest number of claims in the period covered by the chart.
  • The growth in landlord claims contrasts with a recent decline in total claims – from 170, 000 in 2013, to 111,000 in 2019.
  • Nonetheless, landlord claims (England & Wales) in 2019 were over 24,000 whilst in 2005, they numbered just over 19,000 – so this is hardly a dramatic rise in activity: The PRS has grown from around 12% of  households to around 20% in the same time period.
  • Repossession waiting times- that is the time between the initial claim for repossession and bailiff enforcement- have shown no decrease over the last 10 years. 
  • The mean and median times have lingered around the mid-twenty and 16 week mark, respectively. 
  • The mean time for repossession has been recorded as high as 31.4 weeks (2011).
  • The feasible target waiting time of ten weeks- calculated from the Civil Procedure Rules for possession action- has not been achieved for even one quarter in this study period.
  • For a more detailed explanation of this 10 week figure, please click here.
  • The 29 HHSRS hazards are classified as Category I if a hazard is a serious and immediate risk to a person’s health and safety.
  • The proportion of PRS dwellings with a Cat 1 hazard has more than halved over this period – from 30.1% of dwellings in the PRS in 2008 to 14.1% in 2018 (this data was published in the 2018-19 English Housing Survey* published in January 2020). 
  • The gap between the PRS and privately owned accomodation has clearly narrowed over this period, reflecting landlord investment in property.
(* The table this data is drawn from is labelled 2018) 

This is our new Landlords’ Confidence Index (LCI), providing analysis on the key decisions and motivations driving the PRS.

  • The Landlord Confidence Index breaks down what landlords are telling us in each region.

  • The index reports on the actions, motivations and wider impacts of the decisions landlords are taking.

  • The index builds up over time to be an essential snapshot of the factors underpinning the supply side of the Private Rented Sector.

For more data & analysis from our observatory please follow this link: