The Data Observatory
The NRLA Data Observatory is a collection of official and other well-established data sources which when combined, provide a narrative of the Private Rented Sector (PRS). The NRLA tracks approximately 45 key data sets which are updated monthly, quarterly and annually. A selection of these data sets appear in these pages.
Our Deep Insight blog provides a regular extension of the analysis which appears here, as well as those datasets which are not published in the Data Observatory section of this website.
The blog pages also features blog posts from other organisations and academics to provide insight on the PRS. Here you can also find more in-depth summaries of our regular reports and surveys.
Growth & the PRS
Chart 1: Change in GDP-measured quarterly
UK gross domestic product (GDP) is estimated to have increased by 1.3% in Quarter 3 (Jul to Sept) 2021 following the continued easing of coronavirus (COVID-19) restrictions (shown on the chart as the jade-coloured bars). This follows the (revised) growth of 5.5% in Quarter 2.
Much of the growth has been driven by the service sector. Accommodation and food services rose by 30% in Quarter 3 2021, while the arts, entertainment and recreation services increased by 19.6%. In contrast, construction output fell by 1.5% in Quarter 3 2021, after four consecutive quarterly increases. There was a fall across all sub-sectors of construction reflecting challenges faced by the construction industry from rising input prices and delays to the availability of construction products.
The level of real GDP is now 2.1% below where it was pre-coronavirus pandemic at Quarter 4 (Oct to Dec) 2019.
Note that GDP is always subject to some revision. The ONS warn in their reporting that GDP estimates are "subject to more uncertainty than usual". The NRLA track the first quarterly estimate series. Because of Covid-19, differences between this estimate and subsequent estimates can presently be large: In 2021 Qtr2 for example the first estimate (as reported here) for quarter-on-quarter growth was 4.8%, but this was subsequently revised to 5.5% growth.
Changes in price indices
Chart 2: Private rental price changes compared to other price indices
The chart above focuses on price changes in the economy since 2017. It shows three different measures of price change. Firstly, the Consumer Price Index (favoured by economists as the measure of overall price change in the economy). Secondly the CPIH, this index factors in the housing costs of owner occupiers.
Finally the chart shows the Index of Private Housing Rental Prices (IPHRP) – an index which tracks the prices paid for renting property from private landlords in the UK.
In December the IPHRP index for the UK rose from 111.7 in November to 112.0 - UK rental prices in the private sector have grown 12.0% since January 2015 (the base period for the index).
Previous blogs have reflected on the surge in the wider consumer price indices. This continues but it is now becoming increasingly clear that the IPHRP index line is steepening - this means rental price inflation is accelerating. Between January and June 2021 he rental price index grew 0.5%. Between July and December the index grew 1.2% - more than double the rate of the first half of the year.
The chart above shows the dramatic surge in the two consumer price indices continues. The other widely used measure of prices, the RPI (which is not a measure favoured by the ONS) is even higher at 7.5%.
The annual growth in the IPHRP is 1.8% whilst the two consumer price measures have grown 5.4% (CPI) and 4.8%(CPI(H)). Rents are clearly not keeping pace with inflation. There must be a temptation for landlords to build into new tenancies expectations of future rises - this may explain the recent acceleration of the index. As the regional analysis of IPHRP shows, rental price inflation is now rising in almost every English region.
Price rises in transport (fuel costs), and housing and household services were the largest contributors to inflationary pressures in December 2021. Average petrol prices stood at 145.8 pence per litre in December 2021, compared with 114.1 pence per litre a year earlier. Used car prices have grown 28.0% since January 2021. By comparison they grew 7.3% over the same period in the previous year.
Unfortunately for all, there is further inflationary pressure building through energy prices. The contribution from housing and household services (which includes gas and electricity bills) increased from 1.28 percentage points in November to 1.31 percentage points in December 2021. As we all know there may be future hikes coming down the track.
The IPHRP (Index of Private Housing Rental Prices) is “an experimental price index tracking the prices paid for renting property from private landlords in the United Kingdom.” (ONS). For more information on the IPHRP and how the ONS are planning to make further improvements to measuring rental prices, see this article here.
Like the other price indices, the IPHRP is compiled by the ONS. It is the best available measure of housing costs in the Private Rented Sector amongst both new and existing tenants. This article, written by the ONS explains why this measure is a more complete, more robust measure of price changes in the PRS than other industry-generated measures. The ONS report on the IPHRP now acknowledges the lag between price changes in new tenancies and the index.
Wages & the PRS
Chart 3: A comparison between wages & rental prices (Latest figures: November & December 2021)
This chart shows the growth in real wages (allowing for inflation) against the growth in the IPHRP. Note that the lastest figures here are December 2021 for the IPHRP and November 2021 for wages. We have rebased the wages data so the base period matches that of the IPHRP.
This blog has reported many times the fluctuations in the wage data as a consequence of the pandemic. In October it was noted wage growth had stabilised. In November wage growth was negative meaning real wages (that is,after adjusting for inflation) fell - by 0.9%pa compared with the year until October. This equates to a fall in Average Weekly Earnings of £1pw since October - real average weekly wages are now £519.
This is a product of at least three factors (i) inflationary pressures eroding the value of real wages (ii) low paid workers returning to payrolls and (iii) freelancers and the self employed also moving into paid jobs as the economic fall-out of the pandemic continues.
The gap between rental prices and wages is continuing to widen as inflationary pressures build. These pressures are much greater in the basket of goods and services we buy than in the housing we rent (see the previous chart) but personal finances are being stretched as inflation bites into the mixed economic recovery now underway.
The ONS themselves have recently commented on wage data and the impact of the pandemic. The ONS recognise the limitations of this data series during the pandemic period. This in-depth analysis of wage data published by the ONS provides more insight on wage dynamics during the pandemic.
[Note: Wage data is prone to revisions, which can be significant, especially during 2020 (and 2021) when labour markets, employment and wages have been subject to furlough schemes and sudden shocks]. For example in the indexed series above in March 2021 the ONS revised the data from 105.6 to 106.2 (*before the NRLA rebase calculation) . Note that the data on wages is based on surveys of employers and do not include self-employed workers.]