RLA Pearl Data Observatory

Growth & PRS Prices

GDP growth continues to struggle – the current annual rate of growth falling from 1.8% to 1.2%

  • GDP for the most recent quarter shows negative growth (-0.2%). This is the first quarter of negative growth since 2012 (Q4) which was also -0.2% growth. 
  • The ONS have put the contraction in Quarter 2 2019 down to weakeness in production and construction.
  • Though the service sector grew, it did so by just 0.1%.
  • You can read more about the current performance of the UK economy here
  • NB: The official definition of recession is two consecutive quarters of negative growth. 
  • 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)

  • The IPHRP is compared to the CPI and the CPIH.  The latter is a measure of the annual rate of UK consumer price inflation that includes owner occupiers’ housing costs.
  • Note how, at the end of 2016 the IPHRP becomes less steep and the gap between it and the other indices narrows.

  • In March 2019 the IPHRP fell BELOW the other price indices. The most recent data (for August 2019) shows this trend path is continuing.

  • There is some evidence that the IPHRP has put in a pivot in the spring of 2018 from which the index has grown at a slightly higher rate BUT the key trend – the IPHRP growing at a rate below the other indices – is the key feature.

This chart shows the growth in real wages (allowing for inflation) against the growth in the IPHRP.  Wages are at a GB level, but we selected IPHRP on a UK-wide statistic. This is simply because they have a common base year (future versions will rebase GB-IPHRP).

  • Stagnant real wages saw a gap open up between rental prices and real wages: The increasing gap between PRS affordability and income has been a product of low real wage growth.
  • Rental prices have risen modestly and are at a level aligned to other inflation indicies (see previous chart).
  • There has been a growth in real wages which has become more pronounced since Q2 of this year. 
  • Nonetheless real wages are now only back to the level they were in March 2010.  

Lending & Housebuilding

  • The chart shows how the buy to let market drove UK residential loans 2010-2015 – the proportion of buy-to-lets growing in a growing market.
  • However, following the peak in 2016 there has been a noticeable decline in buy-to-lets as a proportion of lending.
  • Follow this link for more analysis of the pattern of buy-to-let lending 
  • This chart highlights how crucial the PRS is in the supply of homes.
  •  The number of new dwellings which have started to be constructed HAS risen over the period covered in the chart – from 125,000 per year in 2013 to 165,000 in 2019.
  •  However social housing starts continues to account for a low proportion of those starts.
  • Of the 25 quarters covered in the chart above, there were only four quarters in which the number of social housing dwellings started was lower than the 6,120 units started in the first quarter of 2019.
  • Furthermore there is evidence that social housing is become LESS significant in the UK house building mix: In the twelve quarters across the 2013-2015 period, social housing accounted for more that 20% of new dwelling starts in four of those quarters. BUT – in the thirteen quarters since the start of 2016, social housing has never been more than 19% of new dwelling starts.
  • The lack of Social Housing now being built increases the reliance on the PRS to supply homes.

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

  • Rents in England are almost 50% higher than Northern Ireland.
  • These growth rates cover a seven year period.
  • The highest growth in rents were seen in England.
  • Between January 2011 and Dec 2018, CPI grew 17.3%, and the CPIH 17.5% – twice the increase in PRS median weekly rent levels.

regional PRS data

  • Note the differential between rent levels in the London region and elsewhere.
  • Though not shown, median weekly rents in several English regions were higher in 2016/17 than this.
  • These regions where rent was higher in the previous year include the North East and Yorkshire and the Humber (both were £109 in 2016/17) and the South West (£155).
  • In the North East, rents are low, have been falling and are now growing at a very low rate (see next table).
  • This chart reflects growth in rental prices – the IPHRP – over the last twelve months in England – by region – and in Wales.
  • Rental prices are now growing most strongly in the South West. Previously – going back to at least March when the RLA began coverage – rental price growth had been strongest in the East Midlands.
  • The data highlights the current – and continued – weakness in the London rental market. Annual rental growth in the capital has fallen back from an annual growth rate of 0.9% in July to 0.8%pa in August.
  • The importance of London to the overall health of the PRS sector is at least in part because 38% of all households in Inner London, and 25% of all households in Outer London, privately rent (2016/17).

Possession claims

  • Since 2005 private landlord claims have risen,  2018 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 122,000 in 2018.
  • Nonetheless, landlord claims (England & Wales) in 2018 were 23,000 whilst in 2005, they numbered just over 18,000 – 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.
  • 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 households with a Cat 1 hazard has halved over this period.
  • The gap between the PRS and privately owned accomodation has clearly narrowed over this period, reflecting landlord investment in property.

This is a full draft of what will be our Landlord’s Confidence Index, 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.

  • Landlords in Walest presently have the lowest levels of confidence, whilst in the South-West, confidence is highest. Although “least low” would perhaps be  a more accurate way of describing confidence it. 
  • Across the country (England and Wales) there is prevailing mood of pessimism. 
  • Our weighted index will become more important with more data. At present the North East is the least confident region based on weighted averages. 
  • We are still seeing more landlords sell property than buy.
  • In deciding to adjust either the size of their property portfolio, or rents a common set of factors emerge. The hits landlords have taken from changes in tax legislation, as well as the burden and costs of  changes in legislation all underpin the decision to sell.
  • Note the dramatic increase in those planning to sell property in the next twelve months – 34% of all landlords now considering selling.

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

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