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
Quarter 2, 2020 was the largest quarterly contraction in the UK economy since ONS records began in 1955. Quarter 3 was also an ONS record: The revised 16.9% growth in Quarter 3 was the largest economic expansion since 1955.
In the first quarter of 2021 the economy slipped back by comparison to the previous quarter. UK gross domestic product (GDP) is estimated to have contracted by 1.6% in Quarter 1. This is largely the result of the tightening of Covid-restrictions in the run up to Christmas 2020.
Compared to Qtr 1 last year, GDP is 6.1% smaller. The level of GDP in the UK is now 8.8% below pre-pandemic levels at the end of 2019.
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.
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 - April 2021
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 tracking the prices paid for renting property from private landlords in the UK.
In June the IPHRP index for the UK rose to 110.6 (from 110.4 in May) - UK rental prices in the private sector have grown 10.6% since January 2015 (the base period for the index). This is a 0.2pts increase since May. In contrast the CPI rose 0.5pts and CPI(H) rose 0.4pts. Price indices are continuing to pull away from rental prices.
Both the CPI and CPI(H) annual growth rates are over 2%pa (2.1%), and have been so for two consecutive months. This is the first time this has occured since Nov & Dec 2018. It was February 2018 when each of these two indices were higher.
Since January 2021 prices recorded in the CPI rose 2.1%, CPI(H) has grown 1.9%. Rental prices have grown just 0.5% 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.
According to the ONS, prices for food, second-hand cars, clothing and footwear, eating and drinking out, and motor fuel rose in 2021 but mostly fell in 2020. This explains much of the change in the rate of the wider price indices.
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. There is more detail here. The ONS are now reporting this has beome less of an issue than for previous months.
One final thing that is worth mentioning is the technical construction of the IPHRP index. There is more information on this here. Without getting bogged down in the detail, the Index is now looking at rental contracts and prices entirely influenced by the pandemic-shaped world. In previous reports, this blog has noted there may well be divergence between rental prices and broader price indices. This divergence would show most markedly in regional price variations. This now becoming more clear. The NRLA discuss regional differences in the index here.
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: May & June 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 June 2021 for the IPHRP and May 2021 for wages.
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 April this became even more notable with year-on-year wage growth appearing to be 6.8% (this was an upward revision from the 6.6% previously reported). In May, growth slowed - but only to 6.4%pa!
This level of gwoth is still twice the equivalent yearly growth figure for February (3.2%pa). These are supposedly real wage growth figures. Note that we are continuing to see inflation in the UK grow.
This is absurd. At a micro-economic level, even though the supply side of the PRS is experiencing an increase in landlord confidence, the data hardly reflects a tenant-led boom in demand for property.
Thus wage data continues to be distant from labour market reality. Contract and lower paid workers are being taken off payrolls, whilst management level employees are returning from furlough. Furlough lowered wages during 2020 and now they are appearing to grow as the workforce returns.
ONS measures of wage growth - this particular measure does not include the self-employed - are just not able to reflect these unique circumstances. Note that the ONS are now recognising some of the issues and limitations of this data series during this pandemic period. See this in-depth analysis of wage data published by the ONS.
It may not be until the economy fully reopens that the ONS measure of wage growth becomes more reliable as an economic indicator.
[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.]