Private rental prices paid by tenants in Great Britain rose by 2.5% in the 12 months to December 2015, according to the latest index from the Office of National Statistics.
Private rental prices grew by 2.7% in England, 0.7% in Wales and 0.9% in Scotland with rental prices increasing the most in London at 3.9%. When London is excluded the national year on year growth is 1.8%.
Some of the more detailed ONS figures show that since January 2011 England rental prices have increased more than those of Wales and Scotland. The annual rate of change for Wales continues to be below that of England and the Great Britain average.
Rental growth in Scotland has slowed to 0.9% in the year to December 2015, from 2.1% in the year for the months of January through to June 2015.
The index series for England starts in 2005. Private rental prices in England show three distinct periods: rental price increases from January 2006 until October 2009, rental price decreases from December 2009 to October 2010, and increasing rental prices from November 2010 onwards.
Of these three periods, 2008 showed the largest rental price increases. When London is excluded, England shows a similar pattern but with slower rental price increases from around January 2011.
Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3% year on year, with December 2015 rental prices being 2.7% higher than December 2014 rental prices. Excluding London, England showed an increase of 1.9% for the same period.
In the 12 months to December 2015, private rental prices increased in each of the nine English regions with the largest in London at 3.9% followed by the East at 2.8% and the South East also at 2.8%. Rental price increases have been stronger in London than the rest of England since November 2010.
The rental market continued to show signs of strength overall in the fourth quarter of 2015 as prices increased by 2.5% in the year to December 2015 but this was a slowdown of 0.2% in the annual growth rate compared with September 2015.
The ONS report says that this slowdown is partly driven by Scotland, where prices increased 0.9% in the year to December 2015, a fall of 0.7% compared with the annual growth rate in September 2015.
It also points out that conditions in the housing market as a whole may have been supporting rental price growth. Data from the ONS house price index for November 2015 shows that house price growth has typically been stronger than rent price growth for a number of years.
The Bank of England’s Agents’ Summary of Business Conditions for the fourth quarter of 2015 reported that private rental demand continued to grow steadily in the three months to December.
Data from RICS’ Residential Market Survey for November 2015 confirmed this growth, noting that national tenant demand continued to grow in the three months to November 2015. The strength in demand is in contrast to supply and the latest RICS survey found that new landlord instructions fell again in November.
However, there are marked regional patterns in conditions, as noted by the Association of Residential Letting Agents (ARLA). In London, where they found demand is above the UK average and supply is the weakest of any region, price growth has been relatively high at 3.9% in the year to December 2015.
In Scotland, by contrast, where demand is weaker and supply is stronger, price growth has been more subdued at 0.9% in the past year.
The report also points out that broader economic indicators suggest that the economy has continued to grow relatively strongly over recent periods, with output increasing 0.4% in the third quarter of 2015 and labour market conditions have continued to improve as unemployment fell to 5.1% in the three months to November 2015.
It adds that a resurgence in job to job moves and tightening more widely suggests confidence in labour market outcomes remains high. Regular pay also grew 1.9% over the same period, continuing the run of revived real earnings growth, although rental prices are growing at a slightly faster rate than real wages in recent months,’ it concludes.