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 data published for October shows the IPHRP for the UK remains at 1.3%pa for both GB and the UK.  This has been unchanged since May 2019. Excluding London, the IPHRP indicates rental prices grew 1.5%pa  – this is unchanged since January.  The index has increased to 108.1 (in January the index was 107.1).  In other words, UK rental prices in the private sector have grown 8.1% since January 2015.
  • 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

  • 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 October 2019) shows this path is continuing.

  • For a closer look at the IPHRP see a selection of posts on our site, including this most recent analysis (based up to and including August 2019).

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 now change at a level lower than prices elsewhere in the UK economy (see previous chart).
  • There has been a growth in real wages which began in Feb 2018. This has growth has become more pronounced since Q2 of this year.  
  • There is a clear upward trend in real wages, narrowing the gap in the affordability of private rented property.

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.
  • 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.
  • Follow this link for more analysis of the pattern of buy-to-let lending (Based on Qtr1 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 September and October by English region – as well as England and Wales.
  • Rental prices are continuing to grow most strongly in the South West. This is the third consecutive month rental growth has been strongest in this region. 
  • The data highlights the current – and continued – weakness in the London rental market. It was August 2017 when annual rental price growth last exceeded 1%pa, and October failed to break this trend – with annual rental prices growing by 0.9% for the second consecutive month. On the upside, annual rental prices in London have grown by either 0.8% or 0.9% for the last six consecutive months. There is more analysis of London rental price growth in this blog piece written in Sepetember 2019.
  • 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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