Index of Private Housing Rental Prices, UK: September 2018

An experimental price index tracking the prices paid for renting property from private landlords in the United Kingdom of Great Britain and Northern Ireland.

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Contact:
Email Rhys Lewis

Release date:
17 October 2018

Next release:
14 November 2018

1. Main points

  • Private rental prices paid by tenants in the UK rose by 0.9% in the 12 months to September 2018, unchanged from the 12 months to August 2018.

  • In England, private rental prices grew by 0.9%, Wales experienced growth of 1.0% while Scotland saw rental prices increase by 0.6% in the 12 months to September 2018.

  • London private rental prices decreased by 0.2% in the 12 months to September 2018; up from a fall of 0.3% in the 12 months to August 2018.

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2. Things you need to know about this release

The Index of Private Housing Rental Prices (IPHRP) measures the change in the 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 only measure the change in newly-advertised rental prices, but reflects price changes for all private rental properties.

The IPHRP is constructed using administrative data. That is, the index makes use of data that are already collected for other purposes to estimate rental prices. The sources of private rental prices are Valuation Office Agency (VOA), Scottish Government (SG), Welsh Government (WG) and Northern Ireland Housing Executive (NIHE). All these organisations deploy rental officers to collect the price paid for privately-rented properties. Data for Northern Ireland also include data provided by propertynews.com. Annually, over 450,000 private rents prices are collected in England, 30,000 in Wales, 25,000 in Scotland and 15,000 in Northern Ireland. The sources of expenditure weights are the Ministry of Housing, Communities and Local Government (MHCLG), Scottish Government, Welsh Government, NIHE and the VOA.

IPHRP is released as an Experimental Statistic. While the methodology (PDF, 2.4MB) for IPHRP is final, Northern Ireland data were previously excluded from the price index. We have since worked with the NIHE to secure private rental data for Northern Ireland with results first published in our August 2018 release on 19 September 2018. We have also used this data to improve the coverage of IPHRP to that of the UK, which is published for the first time as part of this release.

To produce a UK series, the IPHRP has been re-referenced from January 2011 equals 100 to January 2015 equals 100. This was done because Northern Ireland data are only available from January 2015. Growth rates are unaffected by this change but users of indices should ensure that, in using these data to calculate their own rates of inflation, that they use indices calculated using the same reference period.

The IPHRP is scheduled to be assessed against the Code of Practice for Statistics in December 2018 with the aim of achieving National Statistics status for the release.

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3. Growth in UK private rental prices slows

Growth in private rental prices paid by tenants in the UK has slowed since the beginning of 2016, increasing by 0.9% in the 12 months to September 2018. For example, a property that was rented for £500 per month in September 2017, which saw its rent increase by the average rate in the UK, would be rented for £504.50 in September 2018. This slowdown in the growth in private rental prices in the UK is driven mainly by a slowdown in London over the same period.

Rental prices for the UK excluding London increased by 1.5% in the 12 months to September 2018, unchanged from August 2018 (Figure 1). London private rental prices decreased by 0.2% in the 12 months to September 2018; up from a fall of 0.3% in the 12 months to August 2018.

The Royal Institution of Chartered Surveyors (RICS) August 2018 Residential Market Survey reported a further decline in rental stock coming to the market, a trend that has been emerging on the back of tax changes on buy-to-let properties. Tenant demand continues to rise, marking its strongest reading since October 2016. Because of this, near-term rent expectations point to further rental growth in the coming three months.

Contrary to this, the Association of Residential Letting Agents (ARLA) reported in their Private Rented Sector Report for August 2018 that the supply of available properties increased while demand from prospective tenants dropped in August. They also note that the number of landlords selling their buy-to-let properties remained high.

These supply and demand pressures can take time to feed through to the Index of Private Housing Rental Prices, which reflects price changes for all private rental properties, rather than only newly-advertised rental properties.

Focusing on the long term trend, between January 2015 and September 2018, private rental prices in the UK increased by 6.6% (Figure 2).

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4. Growth in Wales private rental prices above England and Scotland

The annual rate of change for Wales (1.0%) in September 2018 is still marginally higher than the annual rate of change for England (0.9%). Wales showed a broad increase in its annual growth rate between July 2016 (Figure 3) and the end of 2017, but has fallen back during 2018. This slightly stronger growth in Wales may be a response to stronger rental demand in Wales, as reported by the Association of Residential Letting Agents (ARLA) in their April and August 2018 reports.

In England, private rental prices grew by 0.9% in the 12 months to September 2018, unchanged from August 2018. When London is excluded from England, privately-rented properties increased by 1.6% in the 12 months to September 2018.

Rental growth in Scotland increased by 0.6% in the 12 months to September 2018, up from 0.5% in August 2018. The historic weaker growth since mid-2016 may be due to stronger supply and weaker demand in Scotland, as reported by ARLA in their Private Rented Sector Report for July and August 2018.

The annual rate of change for Northern Ireland (1.7%) in June 2018 is higher than the other countries of the UK. Northern Ireland has seen an increase in its annual growth rate between the end of 2016 and the end of 2017, but has fallen back slightly during 2018. Northern Ireland data have been copied forward since June 2018. The next update to Northern Ireland data will be in December 2018.

All UK countries have experienced rises in their private rental prices since 2015 (Figure 4). Since January 2015, rental prices in England have increased more than those in Wales, Scotland and Northern Ireland.

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5. London private rental prices fall over the year

London private rental prices fell by 0.2% in the 12 months to September 2018, up from a fall of 0.3% in August 2018. However, the Royal Institution of Chartered Surveyors (RICS) reported in their July 2018 Residential Market Survey that expectations are now positive in the capital, for the first time since August 2016. Their August 2018 report (PDF, 637KB) highlights a growing imbalance between tenant demand and supply, which has pushed up London rent expectations for the year ahead. This may feed through to the Index of Private Housing Rental Prices over time, which is a stock measure.

Focusing on the English regions, the largest annual rental price increase in the 12 months to September 2018 was in the East Midlands (2.9%), up from 2.8% in August 2018 (Figure 5). This was followed by the South West (1.9%), down from 2.1% in August 2018 and the East of England (1.9%), unchanged from August 2018.

The lowest annual rental price increase was in London (negative 0.2%), up from negative 0.3% in August 2018. It was followed by the North East (0.2%), unchanged from August 2018.

Figure 6 shows the historical 12-month percentage growth rate in the rental prices of each of the English regions.

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6. New in this release

UK estimates have been published as part of this release. As Northern Ireland data are only available from January 2015, to allow the calculation of a UK series the index has been re-referenced from January 2011 equals 100 to January 2015 equals 100. Growth rates are unaffected by this change. Our associated datasets have been updated to include data for Northern Ireland and the UK.

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8. Quality and methodology

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

  • the strengths and limitations of the data and how it compares with related data

  • uses and users of the data

  • how the output was created

  • the quality of the output including the accuracy of the data

Private rental growth measures, a UK comparison, compares the growth in the Index of Private Housing Rental Prices to other measures of private rental growth.

Quality assurance of administrative data used in private rental housing statistics documents the administrative data sources used in the production of the Index of Private Housing Rental Prices and the quality assurance processes applied to them.

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Contact details for this Statistical bulletin

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