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ONS Produces Experimental PRS Index

June 28, 2013 | Company News   Landlord News  

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The Office for National Statistics has published its Index of Private Housing Rental Prices (IPHRP), but unlike their house sales index, it contains no actual prices. A spokesperson from the ONS said, “We are not publishing average rental prices or rental price levels. The index covers the change in the level of rents, the same way that other inflation measures cover the change in the prices of goods.

“For some areas you will be able to find the prices through other sources, such as Valuation Office Agency’s housing market statistics, which provide average rental prices for England.”

Produced from a number of administrative sources in order to track the changes in the price charged for renting private housing, it is classified for the time being as “experimental”. As it has not yet undergone assessment for compliance with the Code of Practice for Official Statistics, it is not yet classified as National Statistics.

The production of rental indices by so reputable a source will come as welcome news to many in the industry. Often figures of questionable accuracy will be thrown around by various sources with differing methodologies, many of which conflict with one another, making it very difficult to ascertain a true picture of national rental prices.

According to the ONS, the “methodology of the IPHRP is composed of two main parts: weights and indices. Expenditure weights are calculated on a yearly basis and reflect the expenditure of the regions and countries of Great Britain on rented private housing. Indices are calculated monthly and show the rental prices paid relative to January 2011. Indices are calculated within country and region for each property type… The indices are aggregated first across furnished and unfurnished data, and then across the different property types in order to calculate indices for each region and country. Both these aggregations are carried out using expenditure weights.”

They show that between May 2012 and May 2013, private rental prices in Great Britain increased by 1.3%. When London was excluded from the data, this figure shrunk to 0.8%.

In the period January 2011 to May 2013, rents were found to have increased the most in England, although rents grew in all of the constituent countries of Great Britain. Between May 2012 and May 2013, private rental prices in Wales saw the greatest increase (1.5%), while in England it grew 1.3% and in Scotland 1.0% (currently there is no IPHRP produced for Northern Ireland).

The IPHRP also shows the change in private rental prices in England from 2005 to 2013 was an increase of 8.4%. It was found to have three distinct periods. Rents increased from January 2006 to November 2009, then decreased from December 2009 to November 2010. The current upward trend began in December 2010. The largest rental price increases happened in 2008. Up until January 2012, the figures for England and England (excluding London) were very similar. Now they are more separate than ever before.

Over the last year, eight of the nine regions of England experienced a growth in rental prices, the odd one out being the North-East, where there was a decrease of 0.1%. Rental price increases were highest in London (2.2%) and the South-East (1.2%).

In the eight year period between May 2005 and May 2013, private rental prices grew in London by 11% and in the East by 8.3%. Yorkshire and the Humber was found to have been the most stable region.

Ian Fletcher, Director of Policy at the British Property Federation, said, “For too long we have lacked a decent official statistic on rental growth, and as a result that void has been filled by all manner of surveys and commentators all too prepared to paint a false picture of what is happening to rents in the private rented sector.

“This index is therefore welcome and though experimental, hopefully will become an established part of our national statistics and provide the insight we have lacked.

“What is clear is that rents in the private rented sector have not risen at anything like the rate that some people would like to portray. Private rents do not rise at the rate that is often perceived because most landlords do not raise rents every calendar year, but only when a tenant moves on, which is typically every 20 months or so.

“There is also a view amongst some commentators that frothy rents in a few postcodes in London are somehow indicative of the country as a whole.”

 

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