RLA Pearl Data Observatory

Growth & PRS Prices

The economy avoided recession though growth continues to be low. The current annual rate of growth has fallen to just 1%pa. 

  • This is the lowest annualised rate of growth since before the London Olympics.
  • GDP for the most recent quarter shows positive growth (0.3%) compared to negative growth (-0.2%) in the previous quarter. 
  • The ONS reported a particularly strong July. The quarterly growth in Construction sector was noticable, it was the sector’s strongest growth period since the Spring. 
  • You can read more about the current performance of the UK economy here.  

In December, the IPHRP index rose to 108.5 – meaning UK rental prices in the private sector have grown 8.5% since January 2015.

UK private sector price increases are now level with the two main economy-wide price indices, the CPI and the CPIH. This is the first time this happened since March 2019. 

In terms of annual price growth, the IPHRP shows private rental prices grew 1.4% in the year until December -the same as for November. Compared to the annual level of price rises in the wider economy, it is slightly above the CPI (1.3%) and identical to the CPIH (also 1.4%), which 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.

  • However, as RLA PEARL has previously highlighted there is some evidence that the recovery in price growth has been getting stronger since early/mid 2018. December 2019 is the 20th consecutive month of growth in the IPHRP index shown above.  The IPHRP index has grown evey month in 2019. This is the first time it has done so since 2015. In January the index was 107.1. 
  • Further more the index has grown by 0.2 percentage points for the second consecutive month. The last time this happened was in November 2016-January 2017. 
  • In March 2019 the IPHRP fell BELOW the other price indices. The most recent data for December 2019 shows this has now ended.

  • 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. 

Real wages which have been growing quite noticably since Feb 2018, have stalled in October (the latest month for which there is data) with the index at 104.0 for the second consecutive month.

With the growth in the IPHRP in November, the affordability gap has grown a little. It should be noted however wage data in particular can be subject to some fluctuation

Prior to the recent growth in real wages, a gap had opened up between rental prices and wages: But as the graph shows, the increasing gap between PRS affordability and income was a product of low real wage growth rather than a rapid growth in rents.

[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 2010-2015 – 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 the Q3 data for 2019 did not make a new lower low, although the down trend is continuing.
  • Follow this link for more analysis of this data.

The above chart highlights how crucial the PRS is in the supply of homes. 

  • The chart shows the total number of dwellings has risen since 2010 – from 106,730 in 2010 to 164,390 in 2018.
  • However social housing starts continues to account for a low proportion of the total.

Of the 38 quarters covered by the table:

  • Only in half of the period covered (19 quarters) does the proportion of social housing exceed 20% of all dwellings completed.
  • The last time this 20% level was reached was in 2015 (Q3) – though the most recent data was only just shy of this mark (19.9%).

Though not shown, in Q1 2010 the number of social housing dwellings completed was 6,910. This was a level rarely exceed until 2015.  However this level has been exceed in the last seven quarters.

Nevertheless, since 2016 only around 100,000 dwellings for social housing purposes have been completed – with fewer than 16,000 of these being Local Authority built.

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 based on annual change in November & December by English region – as well as England and Wales.
  • The overall price index did not grow in England as a whole (remaining at 1.4%pa growth for the third consecutive month).
  • There was a mixed pattern across England. In the North West, the South East and the South West the index fell. In the East of England and London the index grew – meaning rental prices increased more substantially. In the remaining four regions the index stayed the same, meaning the increase in the twelve months to December was the same as the equivalent period ending in November.
  • There is some sign of the recent dramatic increases in rental prices in the South West beginning to slow. The level of growth in this region continues to the highest in England – now for the FIFTH consecutive month. growth in private rental prices is continuing to ramp up.  
  • In London, annual price growth increased to 1.2%pa. The level of rental price growth in the capital has been a feature of 2019: in the twelve months to January 2019, house price rental increases were virtually non-existant (0.1%pa), by December the twelve month rental increase was 1.2%pa. This is still however below the national average (1.4%pa).

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 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 information on the index, either click here, or click either page.

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

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