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
As the economy moves towards some form of normality from a unique 2020 GDP statistics continue to fluctuate widely. For example in Construction, compared with the same quarter over a year ago, construction output increased by 53.2%. This reflects comparison with a lower base level and the first lockdown restrictions severely affecting the industry.
UK gross domestic product (GDP) is estimated to have increased by 4.8% in Quarter 2 (Apr to June) 2021 following the easing of coronavirus (COVID-19) restrictions. The largest contributors to this increase were from wholesale and retail trade, accommodation and food service activities, and education. Note there were increases in nearly all main components of expenditure apart from "trade", with the largest contribution from household consumption.
Construction output increased by 3.3% in Quarter 2 2021, reflecting a rise in new work (3.7%), particularly infrastructure, and repair and maintenance (with growth of 1.7%).
The ONS report that in Quarter 1 2021, construction output increased by 2.3% - but was still 3.7% below pre-pandemic levels. The quarterly increase largely reflects a rise in private new housing, and non-housing repair and maintenance. Most recent monthly estimates show growth was particularly strong in March.
The level of GDP is now 4.4% 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".
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 August the IPHRP index for the UK rose from110.7 in July to 110.9 - UK rental prices in the private sector have grown 10.9% since January 2015 (the base period for the index). The big story in the July data however is the leap in consumer prices. The CPI(H) for example rose by 3.0% in the 12 months to August 2021, up from 2.1% in the 12 months to July. The ONS report the increase of 0.9 percentage points between these two months is the largest increase ever recorded in the CPI(H) which began in January 2006. The same observation applies to the CPI - except this index is even more established, beginning in 1997.
Since January 2021 prices recorded in the CPI have risen 2.8%, CPI(H) has grown 2.6%. Rental prices have grown just 0.8% over the same period. Many landlords have invested in property as a substitute for a pension. These landlords are particuarly exposed when rents are not keeping pace with inflation.
The fear is that, once inflation is in the system and being built into expectations, prices will spiral out of control. The ONS remain confident that this month's figures are a so-called "base effect" resulting from discounted restaurant and café prices in August 2020 (the government's Eat Out to Help Out scheme) and reductions in Value Added Tax (VAT) across the same sector.
According to the ONS, downward contributions from recreation and culture, as well as clothing and footwear reduced the headline inflation rate. Transport costs continue to exert upward pressure on inflation. Note that these pressures are from repair and maintenance costs as well as the costs of buying second hand cars. They are not from fuel costs - annual prices rises in fuel are now lower than they were this time last year.
It should be noted that these indices measure a so-called "basket of items". During the pandemic items in that basket have been less available and this has had an influence on the construction of the index. The ONS is now reporting ALL items are now back in the basket. This note will be removed on publication of the next set of figures.
The ONS are warning about so-called "Base Effects" - distortions on individual data sets as a result of the pandemic.
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: July & August 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 August 2021 for the IPHRP and July 2021 for wages. We have rebased the wages data so the base period matches that of the IPHRP.
This analysis has previously made comment about how current labour market dynamics are not being fully reflected in the data series. According to wage data it appears GB workers have never had it so good, with real wages apparently outstripping price indices since August 2020.
In July, real wages were reported to be 5.1% higher than twelve months ago.
Recent wage data has fluctuated because the furlough-response to the pandemic. In addition, contract and lower paid workers are being taken off payrolls. Furlough lowered wages during 2020 and now wages are appearing to grow as the workforce returns and furlough is wound down. Wage growth becomes noticably stronger over the final quarter of 2020, it may be that the fluctuations in the wage data will begin to smooth out, especially once furlough ceases at the end of September.
Note that the ONS are recognise some of the issues and limitations of this data series during the pandemic period. See this in-depth analysis of wage data published by the ONS.
[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.]