1. Main findings

Private rental prices paid by tenants in Great Britain rose by 2.3% in the 12 months to November 2016; this is unchanged compared with the year to October 2016.

Private rental prices grew by 2.4% in England, 0.1% in Scotland and by 0.3% in Wales in the 12 months to November 2016.

Rental prices increased in all the English regions over the year to November 2016, with rental prices increasing the most in the South East (3.4%).

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2. Changes to publication schedule

From January 2017 we are improving the way we publish economic statistics, with related data grouped together under new "theme" days. This will increase the coherence of our data releases and involve minor changes to the timing of certain publications. The impact of this on Index of private housing rental prices (IPHRP) is to bring the release forward to the second or third Tuesday of each month. For more information see Changes to publication schedule for economic statistics.

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3. About this statistical bulletin

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 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), 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.

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 November 2015 and November 2016, Great Britain private rental prices grew by 2.3%. For example, a property that was rented for £500 a month in November 2015, which saw its rent increase by the Great Britain average rate, would be rented for £511.50 in November 2016. Rental prices for Great Britain excluding London grew by 2.2% in the same period (Figure 2).

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4. Rental prices for constituent countries of Great Britain

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 well below that of England and the Great Britain average (Figure 4) but has recovered from a low of negative 0.1% in the year to June 2016. Rental growth in Scotland grew by 0.1% in the 12 months to November 2016 from a high of 2.1% in the year to June 2015.

Between November 2015 and November 2016, rental prices grew by 2.4% in England, grew by 0.1% in Scotland and grew by 0.3% in Wales (Figure 5).

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5. Rental prices in England and its regions

The Index of private housing rental prices (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 June 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.

Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3.0% year-on-year, with November 2016 rental prices being 2.4% higher than November 2015 rental prices (Figure 8). Excluding London, England showed an increase of 2.5% for the same period.

In the 12 months to November 2016, private rental prices increased in all the English regions (Figure 9). The largest annual rental price increases were in the South East (3.4%), unchanged from October 2016. This was followed by the East of England (3.1%), down from 3.2% in October 2016 and London (2.4%), down from 2.6% in October 2016. Rental growth for London is now equal to that of England in the 12 months to November 2016.

The lowest annual rental price increases were in the North East (1.1%), unchanged from October 2016, and the North West (1.1%), down from 1.3% in October 2016. This was followed by Yorkshire and The Humber (1.6%), up from 1.5% in October 2016.

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6. Economic context

The rental market in Great Britain continued to show signs of strength in the year to November 2016, as prices grew by 2.3%. This is unchanged from the previous month and 1.1 percentage points above the consumer prices index in the year to November 2016.

Rental price inflation was strongest in the South East (3.4%) and the East (3.1%). Rental price growth was weakest in the North East (1.1%) and the North West (1.1%).

Looking at data from the UK House Price Index over a longer period shows residential house price growth in Great Britain has typically been stronger than rental price growth for a number of years. There was an average 12-month rate of house price inflation between January 2013 and October 2016 of 6.1%, compared with 2.1% for rental prices between January 2013 and November 2016.

The Royal Institute of Chartered Surveyors (RICS) November 2016 Residential Market Survey reported continued rising tenant demand, though at a more moderate pace than in previous months. Tenant demand continues to outstrip rental property supply apart from in London, where tenant demand is falling and price expectations are negative. The Association of Residential Letting Agents (ARLA) reported a slowdown in demand to its lowest level since May 2016. ARLA suggest the recent announcement of the ban on letting agent fees may soon apply upwards pressure to rent prices.

On the rental market supply side, ARLA reported the lowest level of rental properties managed per letting agent branch since June 2016. RICS also reported a decrease in rental supply when comparing September to November 2016 with August to October 2016.

The relatively short supply of rental properties appears to be supporting rental price growth. However, the reduced demand in London appears to be having an effect, as annual rental price growth in London was down to 2.4% in November 2016 compared to 4.1% in November 2015.

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7. Improvements to IPHRP

From January 2017 we are improving the way we publish economic statistics, with related data grouped together under new "theme" days. This will increase the coherence of our data releases and involve minor changes to the timing of certain publications. For more information see Changes to publication schedule for economic statistics. The impact of this on IPHRP is to bring the release forward to the second or third Tuesday of each month.

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 Index of private housing rental prices (IPHRP) ahead of potential assessment as a National Statistic.

In addition to government sources, a number of private companies such as Countrywide, Homelet and LSL Property Services produce statistics on the private rental market. These are predominantly flow measures of private rents, whereas IPHRP is a stock measure. A comparison of these against IPHRP can be found within Tables 3 and 4 of the IPHRP dataset. Comparing measures of private rental growth also presents these datasets and discusses their differences.

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

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8. How are we doing?

We 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.

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

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9. Data tables

The IPHRP dataset 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 November 2016.

The IPHRP weights summary provides aggregated weights for indicative purposes only. The Index of private housing rental prices (IPHRP) weights are updated annually in February of each year.

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10. Quality and methodology

Details of the methodology used to calculate the Index of private housing rental prices (IPHRP) can be found in the July 2013 IPHRP article but this article requires some updating. This article can also be supplemented by the January 2015 article which presents some recent methodological changes for IPHRP.

The IPHRP Quality and Methodology Information document contains important information on:

  • the strengths and limitations of the data
  • the quality of the output: including the accuracy of the data and how it compares with related data
  • uses and users
  • how the output was created
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11 .Background notes

  1. New this month

    New private rental price data for November 2016 are published this month. The IPHRP dataset has been updated to include data for November 2016.

    Revisions this month

    There are no revisions to Index of private housing rental prices (IPHRP) data this month.

    Revisions next month

    There are no revisions expected in the next IPHRP publication, to be published on Tuesday 17 January 2017.

  2. Publication of IPHRP

    The development of official statistics to cover the private housing rental market and the production of a private housing rental price index was one of the recommendations of the National Statistician’s Review of Housing Market Statistics. This experimental IPHRP release is aimed towards the production of such an index and development of the index will take place in order to further satisfy your needs.

    The production of this index is possible due to recent developments of the housing components of the consumer price indices, and although the same data sources are used by both, the methodology of the IPHRP has been further developed in order to produce a regional level series. Historically IPHRP was published on a quarterly basis. From February 2016, this is now published monthly.

    We invite you to comment on the methodology and current publication of IPHRP. Please send your comments or queries to hpi@ons.gsi.gov.uk.

  3. Experimental status

    We have designated the IPHRP as Experimental Statistics. The results presented in this article are subject to revisions if improvements in the methodology are identified. Results should be interpreted with this in mind.

    In future publications improvements to the methodology may be made and these could lead to revisions. All revisions to the index will be labelled with an “r” and the reason for the revision fully explained in the background notes section.

  4. Relevance of the index

    The IPHRP has multiple potential uses ranging from the assessment of returns from housing investments or buy-to-let property to the setting or updating of social housing rental prices. Currently the IPHRP is the only statistic with Great Britain coverage on private housing rents.

    Additionally, it is based on actual paid rents instead of advertised rents (with the exception of Scotland, which is based on advertised rents).

  5. Other rental price statistics

    There are other official statistics available for rental prices:

    Valuation Office Agency (VOA) publishes private rental market statistics. These cover the average prices paid for renting private housing in England to the level of region and local authority. The composition of the sample used for this publication varies over time and therefore makes it hard to produce reliable comparisons over different time periods. For an evaluation of our rental price indices and the growth in average private rental prices published by VOA please see the article “Explaining private rental growth”.

    Department for Communities and Local Government (DCLG) publishes social rent statistics. These cover average prices paid for renting both local authority and private registered provider (housing association) properties in England. These are collected from the continuous recordings of lettings and sales in social housing (CORE) and are available at regional and local authority level.

    The Scottish government publishes social rent statistics for Scotland. These cover the average weekly rents paid for local authority and registered social landlords, and are available at area level.

    The Welsh government publishes social rent statistics for Wales. These cover the average weekly rents paid for local authority and registered social landlords, and are available at area level. Available in Stats Wales.

    The Northern Ireland Housing Executive publishes a bi-annual Summary Research Report on the Performance of the Rental Market in Northern Ireland. This report analyses trends in the private rental sector at district council level during a 6 month period.

    In addition to government sources, a number of private companies such as Countrywide, Homelet and LSL Property Services produce statistics on the private rental market. These are predominantly flow measures of private rents, whereas IPHRP is a stock measure.

  6. Sources

    The current sources of private rental prices are Valuation Office Agency for England, Scottish government for Scotland and Welsh government for Wales. Private rented dwelling stock estimates are sourced from the Department for Communities and Local Government and Welsh government. The distribution of property type by country and region is sourced from the English housing survey, the Scottish house condition survey and Welsh government. Estimates of the proportions of properties that are rented furnished and unfurnished are produced from the Living Costs and Food Survey. Estimates of the expenditure on property that is rented furnished and unfurnished are sourced from the national accounts.

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Contact details for this Statistical bulletin

Rhys Lewis
hpi@ons.gsi.gov.uk
Telephone: +44 (0)1633 456400