Rents increase 2.8% in England over the last 12 months

• Private rental prices paid by tenants in Great Britain rose by 2.6% in the 12 months to March 2016, unchanged when compared with the year to February 2016.
• Private rental prices grew by 2.8% in England, 0.2% in Wales and 0.6% in Scotland in the 12 months to March 2016.
• Rental prices increased in all the English regions over the year to March 2016, with rental prices increasing the most in London (3.7%).

IPHRP indices: Great Britain, January 2011 to March 2016

Index values (January 2011=100)

The rental market in Great Britain continued to show signs of strength in the year to March 2016, as prices grew by 2.6%, unchanged on the January and February 2016 rates. This stable rate of rental price growth at the UK level was broadly replicated at the regional level. Rental price inflation remained strongest in London (3.7%), the East (3.0%) and the South East (2.9%) and weakest in Wales (0.2%), Scotland (0.6%) and the North East of England (0.8%).

Conditions in the housing market as a whole may have been supporting rental price growth. Data from the ONS House Price Index release for February 2016 shows that house price growth has typically been stronger than rental price growth for a number of years. Demand in the housing market continues to strengthen, with RICS’s Residential Market Survey for March 2016 noting that tenant demand grew for the 15th month in a row. The strength in demand is in contrast to supply: the latest RICS survey found that despite a second consecutive increase in supply, this is still being outstripped by demand. The Association of Residential Letting Agents (ARLA) also reported that supply in February 2016 increased slightly from its one year low in January. However, there are marked regional patterns in conditions, as noted by ARLA. In London, where they found demand above the UK average and supply is the weakest, price growth has been relatively high at 3.7% in the year to March 2016. In Scotland, by contrast, where demand is weaker and supply is the strongest of any region, price growth has been more subdued at 0.6% over the past year.

Broader economic indicators suggest that the economy has continued to grow relatively strongly over recent periods, with output increasing 0.4% in Quarter 1 2016, although this is a slowdown compared to 0.6% growth in Quarter 4 2015. Labour market conditions have continued to improve as unemployment fell to 5.1% in the 3 months to February 2016. These improvements, along with falls in the inactivity rate over recent months and tightening more widely suggest confidence in labour market outcomes remains high. Regular pay also grew by 2.2% in the 3 months to February 2016 compared with the same period a year ago – continuing the run of revived real earnings growth, although rental prices have been growing at a slightly faster rate than real wages in recent months.