Private Housing and price inflation - Rent growth continues to lag price indices
Key Points
June 2019 was the 29th consecutive month that the growth in UK private rents increased below the level of inflation:
The Consumer Prices Index (CPI) 12-month rate was 2.0% in June 2019, unchanged from May 2019.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.9% in June 2019, unchanged from May 2019.
Private rental prices paid by tenants in the UK rose by just 1.3% in the 12 months to June 2019, unchanged from May 2019 – this is below the two price indices covered by the RLA PEARL Observatory.
In England, private rental prices grew by 1.3%, Wales experienced growth of 1.1%.
The East Midlands was again the region with the highest level of rental prices (2.1% annual growth). The North East was again the region with the lowest (0.5%). Other than the North East, the only other region with annual rental price growth below 1% was London (0.9%).
Measures of Price Change
- New inflation figures show that rental prices in the private sector (Private Rented Sector, PRS) continue to be below inflation:
- The Index of Private Housing Rental Prices (IPHRP*) measures the change in the price tenants pay when renting residential property from private landlords.
- Growth in the IPHRP was below that of both the CPI (economists’ preferred measure of price growth) and the CPIH (which includes owner occupiers’ housing costs).
Table 1 below shows the recent pattern in these three indices – it highlights the low annual growth in private sector rental prices since 2016.
Note that price growth in the PRS has now been below that expressed in both the CPI and the CPIH for 29 consecutive months.
(*The IPHRP gives 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.)
Table 1: Price Index Change
Rental prices inside - and outside - London
Table 2 shows UK growth in private rent level – highlighting the difference between UK-wide and the “rest of UK” – excluding London.
The table shows private rental price inflation remains higher when London is excluded. This highlights the difficulty the London rental market is presently experiencing.
Table 2 - IPHRP in the UK
Rental Price growth across England & Wales
Annual rental price growth is a key indicator of the strength of the the PRS. Table 3 shows low levels of price growth across England as well as in Wales:
Only in the East Midlands (2.1% annual growth) and the South West (2%) was the annual rate of growth at 2% (which is the same rate as the CPI for June) or higher.
In England, private rental prices grew by 1.3%, Wales experienced growth of 1.1%.
The East Midlands was again the region with the highest level of rental prices (2.1% annual growth). The North East was again the region with the lowest (0.5%).
The West Midlands, East of England and the South East were the only regions which saw a growth – albeit modest (one tenth of one percentage point in each case) – in rental prices.
Other than the North East (0.5%), the only other region with annual rental price growth below 1% was London (0.9%).
On the upside, there is no region in which annual price growth fell from May levels.
Table 3: Annual rental price Growth
This analysis is by Nick Clay. Any views expressed here are not necessarily those of the NRLA.
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