Index of Private Housing Rental Prices, Great Britain: January 2016

Private rental prices paid by tenants in Great Britain rose by 2.6% in the 12 months to January 2016, up from 2.5% in the year to December 2015.

Private rental prices grew by 2.7% in England, 0.3% in Wales and 0.8% in Scotland in the 12 months to January 2016.

Rental prices increased in all the English regions over the year to January 2016, with rental prices increasing the most in London (3.9%).

The Index of Private Housing Rental Prices (IPHRP) measures the change in price of renting residential property from private landlords. The index is published as a series of price indices covering Great Britain, its constituent countries and the English regions.

IPHRP measures the change in price tenants’ face when renting residential property from private landlords, thereby allowing a comparison between the prices tenants are charged in the current month as opposed to the same month in the previous year. The index does not measure the change in newly advertised rental prices only, but reflects price changes for all private rental properties.

IPHRP is released as an experimental statistic. This is a new official statistic undergoing evaluation and therefore it is recommended that caution is exercised when drawing conclusions from the published data as the index is likely to be further developed. Once the methodology is tested and assessed, and the publication meets user needs, the IPHRP will be assessed against the Code of Practice for Official Statistics to achieve National Statistic status. A complete description of the methodology and the sources used is included in the article Index of Private Housing Rental Prices- Historical Series. Further details regarding improvements to the IPHRP price collection methodology can be found in the January 2015 article.

The IPHRP is constructed using administrative data. That is, the index makes use of data that are already collected for other purposes in order to estimate rental prices. The sources of private rental prices are Valuation Office Agency (VOA), Scottish government (SG) and Welsh government (WG). All 3 organisations deploy rental officers to collect the price paid for privately rented properties. The sources of expenditure weights are Department for Communities and Local Government (DCLG), SG, WG and VOA.

DCLG produces estimates of the private rental dwelling stock for England and its regions. SG and WG produce estimates of private rental dwelling stock for Scotland and Wales.

Great Britain rental prices

The Great Britain private rental price series starts in January 2011. This is the date for which all the sources for constituting countries are available on a consistent basis. This index has seen small and gradual increases since January 2011 (Figure 1).

Between January 2015 and January 2016, Great Britain private rental prices grew by 2.6%. For example, a property that was rented for £500 a month in January 2015, which saw its rent increase by the Great Britain average rate, would be rented for £513 in January 2016. Rental prices for Great Britain excluding London grew by 1.8% in the same period (Figure 2).

All the countries that constitute Great Britain have experienced rises in their private rental prices since 2011 (Figure 3). Since January 2011 England rental prices have increased more than those of Wales and Scotland.

The annual rate of change in the IPHRP for Wales (0.3%) continues to be below that of England and the Great Britain average (Figure 4). Rental growth in Scotland has gradually slowed to 0.8% in the year to January 2016, from a high of 2.1% in the year to June 2015.

Between January 2015 and January 2016, rental prices grew by 2.7% in England, 0.3% in Wales and 0.8% in Scotland (Figure 5).

The IPHRP series for England starts in 2005. Private rental prices in England show 3 distinct periods: rental price increases from January 2005 until February 2009, rental price decreases from July 2009 to February 2010, and increasing rental prices from May 2010 onwards (Figure 6). When London is excluded, England shows a similar pattern but with slower rental price increases from around the end of 2010.

Figure 7 shows the historical 12 month percentage growth rate in the rental prices of each of the English regions.

Figure 7: IPHRP percentage change over 12 months by English region, January 2006 to January 2016

Source: Office for National Statistics

Notes:

1. Not seasonally adjusted.

Download this image Figure 7: IPHRP percentage change over 12 months by English region, January 2006 to January 2016

.png (30.1 kB) .xls (57.9 kB)

Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3.0% year-on-year, with January 2016 rental prices being 2.7% higher than January 2015 rental prices (Figure 8). Excluding London, England showed an increase of 2.0% for the same period.

In the 12 months to January 2016, private rental prices increased in each of the 9 English regions (Figure 9). The largest annual rental price increases were in London (3.9%), unchanged from December 2015, followed by the East (2.9%) up from 2.8% and the South East (2.9%) up from 2.8% over the same period. Annual price increases have been stronger in London than the rest of England since November 2010.

The lowest annual rental price increases were in the North East (0.9%) up from 0.6% in December 2015, followed by the North West (1.0%) unchanged for this period and Yorkshire and the Humber (1.2%) up from 0.8%.

Private housing rents continued to grow in the year to January 2016, by 2.6% - up by 0.1 percentage point in annual rent growth compared with the year to December 2015, and an increase of 0.7 percentage points compared with the annual price increase in January 2015. The regional make-up of this growth picture varies, with annual rental price growth rising in Yorkshire and The Humber from 0.8% to 1.2%, and in the North East from 0.6% to 0.9%, whereas it fell in Wales from 0.7% to 0.3%. The growth of rental prices remains the highest in London at 3.9%, unchanged compared with December 2015.

Wider demand and supply conditions in the housing market have contributed to the continuation of rental price growth, including persistent house price growth limiting access to the housing market thereby keeping up demand for rental property. The ONS House Price Index indicates that growth in house prices has tended to be stronger than rental price growth for a number of years. In addition, The Bank of England’s Agents’ Summary of Business Conditions for Quarter 4 (October to December) 2015 reported that private rental demand continued to grow in the 3 months to December. Data from RICS’ Residential Market Survey for January 2016 also noted that tenant demand has continued to grow at a robust pace in the 3 months to January 2016, in all areas of the UK. In contrast, the increase in supply of property available to rent has eased, with the latest RICS survey indicating that new landlord instructions were broadly flat during the same period.

Whilst the national picture is one of rising rents, there are marked regional differences in rental conditions, as noted by the Association of Residential Letting Agents (ARLA). In London, where they found demand is above the UK average and the supply of rental properties is the weakest of any region, price growth has been relatively high at 3.9% in the year to January 2016. In Scotland, by contrast, where demand is weaker and supply is stronger, price growth has been much more modest at 0.8% over the past year.

Broader economic indicators suggest that the economy has continued to grow relatively strongly over recent periods, with output increasing 0.5% in Quarter 4 (October to December) 2015 and 2.2% during 2015 as a whole compared with 2014. Labour market conditions have also continued to improve with the employment rate at 74.1%, the highest on record, and the unemployment rate at 5.1% in the 3 months to December 2015, the lowest it has been since late 2005. Coupled with a fall in the inactivity rate, improvements in earnings growth and perceptions of general tightening in the labour market, confidence in labour market conditions remains high. Despite the improvements in earnings growth and low inflation which led to real wage growth overtaking rental price growth during early to mid 2015, real wage growth has returned to its medium-term trend of being below rental price growth in recent months.

IPHRP is classified as an Experimental Statistic to allow for evaluation of the output against user needs. As part of the ongoing development, we are considering how to improve IPHRP ahead of potential assessment as a National Statistic.

One of the main user requirements was for IPHRP to be published monthly. In response to this requirement, this publication is the first monthly publication of IPHRP. The next monthly publication will be 30 March 2016.

For further details, please contact hpi@ons.gov.uk

We would welcome your views on the data presented in this statistical bulletin. Please contact the Housing Market Indices team using the email address below to discuss any aspect of the data, including your views on how we can improve the data.

hpi@ons.gov.uk

The IPHRP dataset (170.5Kb Excel sheet) provides full historical series for the tables accompanying the IPHRP statistical bulletin. This month, the tables have been updated with the latest monthly estimates for January 2016.