NRLA RESEARCH Observatory

Growth & PRS Prices

The economy is continuing on a bumpy growth path. The current annual rate of growth has fallen to just 1.1%pa – down from 1.2%. 

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 the others, this index is compiled by the ONS and is the best available measure of housing costs in the Private Rented Sector amongst both new and existing tenants.

These data indicate a pull back in private rented sector price growth, following modest but steady growth in 2019.

In February, the IPHRP index rose to 108.7 – meaning UK rental prices in the private sector have grown 8.7% since January 2015 (the base period for the index).

The UK private rented sector price index is fractionally ahead of the two main economy-wide price indices, the CPI and the CPIH. This is the second consecutive month this has happened.

Though not shown here, the annual rate of change of the IPHRP was 1.4% in the year up until February 2019.   The annual rate of growth is now fractionally lower for the private rental price index than either the CPI or the CPIH (both at 1.7%).

 

  • 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 has stalled quite noticably.  

The annual rate of real wage growth (not shown) does continue to be strong. In January real wage growth was 1.4%  – ie 1.4% above the rate of inflation (CPI), Nevertheless, annual real wage growth in January 2020 ws lower than in 10 of the 12 months for 2019.

(It should be noted however wage data in particular can be subject to some fluctuation and figures are always subject to some adjustment)

[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, with slowly growing volumes of dwelling completions. Meanwhile,  there is a decline in the proportion of dwelling completions intended for social  housing. 

  • 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.

In 2019 Q3, local authority dwelling completions was just 810 across the whole of England.

  • This is the greatest number of local authority dwelling completions recorded since at least the year 2000 (when our tracking of the statistics begins) . 
  • Since 2016 only around 110,000 dwellings for social housing purposes have been completed.
  • Since 2000 only 18,500 local authority built dwellings have been completed.  

The pattern of dwelling completions in Wales also 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 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

  • 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 shows the annual growth rate in the IPHRP for January and February.  It shows the slight pull back in rental price growth in February was a consistent pattern across England and Wales. 
  • In England ,the IPHRP clipped back to 1.4% – that is to say rental prices grew 1.4% in the twelve months to February 2020.  In Januray the annual growth was slightly higher at 1.5% pa.
  • In Wales there was also a pull back – from 1.3% growth in January to 1.2% in February. 
  • Only in the North East does the index indicate prices rising faster in February than in January. 
  • The pull-back in the South West is fractional. South West rental price growth continues to be the highest in England. In every month since August 2019 regional rental price growth in the South West has been the highest in England. 
  • In London, annual price growth also pulled back – this is following a period  through 2019 in which rental price growth had shown fragile, but consistent growth. 

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. 
  • 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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