Private rental prices paid by tenants in Great Britain rose by 2.7% in the 12 months to September 2015
Private rental prices grew by 2.8% in England, 1.6% in Scotland and 0.5% in Wales in the 12 months to September 2015
Rental prices increased in all the English regions over the year to September 2015, with rental prices increasing the most in London (4.1%)
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 along with the January 2015 article explaining improvements to the price methodology.
The IPHRP is constructed using administrative data. That is, the index makes use of data that is 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 three 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), Scottish Government, Welsh Government and VOA. DCLG produces estimates of the private rental dwelling stock for England and its regions. Scottish Government and Welsh Government produce estimates of private rental dwelling stock for Scotland and Wales.
DCLG produces estimates of the private rental dwelling stock for England and its regions. Scottish Government and Welsh Government produce estimates of private rental dwelling stock for Scotland and Wales.Back to table of contents
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 September 2014 and September 2015, Great Britain private rental prices grew by 2.7%. For example, a property that was rented for £500 a month in September 2014, which saw its rent increase by the Great Britain average rate, would be rented for £513.50 in September 2015. Rental prices for Great Britain excluding London grew by 1.8% in the same period (Figure 2).
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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 Scotland and Wales.
The annual rate of change in the IPHRP for Wales continues to be below that of England, Scotland and the Great Britain average (Figure 4).
Between September 2014 and September 2015, rental prices grew by 2.8% in England, 1.6% in Scotland and 0.5% in Wales (Figure 5).
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The IPHRP series for England starts in 2005. Private rental prices in England show 3 distinct periods: rental price increases from January 2006 until October 2009, rental price decreases from December 2009 to October 2010, and increasing rental prices from November 2010 onwards (Figure 6). Of these 3 periods, 2008 showed the largest rental price increases. When London is excluded, England shows a similar pattern but with slower rental price increases from around January 2011.
Figure 7 shows the historical 12 month percentage growth rate in the rental prices of each of the English regions.
Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3.0% year-on-year, with September 2015 rental prices being 2.8% higher than September 2014 rental prices (Figure 8). Excluding London, England showed an increase of 1.9% for the same period.
In the 12 months to September 2015, private rental prices increased in each of the 9 English regions (Figure 9). The largest annual rental price increases were in London (4.1%) followed by the South East (2.7%) and the East (2.7%). Rental price increases have been stronger in London than the rest of England since November 2010.
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The rental market in Great Britain continued to show signs of strength in the third quarter of 2015 as prices increased by 2.7% in the year to September 2015. This marked a 1.3 percentage point rise in the rate of growth from September 2014, with rental prices now growing at their joint-fastest annual rate since October 2012. However, this headline figure hides considerable regional variation: while all English regions experienced stronger rental price growth in the year to September 2015 than in the year to September 2014, annual growth in Wales and Scotland slowed.
Increasing demand for rental properties coupled with low supply may be supporting price growth. August’s ONS House Price Index showed that house price growth has typically been stronger than rent price growth for a number of years. The Bank of England’s Agents’ Summary of Business Conditions for Q3 2015 reported the long-term growth in demand for rental properties continued in the three months to September. RICS’ Residential Market Survey for September confirmed this robust growth, noting the strongest tenant demand since Q2 2012 in the third quarter of 2015.
Despite signs of a slight increase in supply growth, growth in demand continues to outpace supply. While the latest RICS release did suggest a marginal increase in new landlord instructions, the longer-term trend within the wider housing market is one of under-supply. Reflecting the Bank of England’s August Inflation Report, which noted that supply remains weak within the housing market, the Association of Residential Letting Agents reported a “dwindling supply” as the average number of properties held per branch fell by 5.8% in August.
Broader economic indicators suggest that the economy has continued to grow relatively strongly over recent periods, with output increasing at a rate similar to its pre-downturn trend. Labour market conditions have continued to improve as unemployment fell to 5.4% for June to August 2015 and annual regular pay grew by 2.9%. These improvements, along with a resurgence in job-to-job moves and tightening more widely, suggest confidence in labour market outcomes remains high. The recent strengthening in nominal pay growth and low inflation means that real wages are now growing at a faster rate than rental prices.Back to table of contents
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 is for IPHRP to be published monthly. Work is taking place to implement monthly publication of IPHRP. The next quarterly publication is scheduled for Friday 29 January 2016 (for October, November and December 2015 data). It is proposed that the January 2016 publication will be the last quarterly publication of IPHRP, with the output moving to a monthly publication from February 2016 (for January 2016 data) onwards (exact date to be finalised).
Work is also progressing towards sourcing a suitable Northern Ireland dataset for inclusion in IPHRP. We have been working with colleagues at the Northern Ireland Housing Executive to identify what data is available and how this could potentially be used in IPHRP. Further progress will be provided in the January 2016 IPHRP, with Northern Ireland data hopefully included later in the year.
For an evaluation of ONS rental price indices and the growth in average private rental prices published by Valuation Office Agency (VOA) please see the article "Explaining private rental growth" (446 Kb Pdf).
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