Private Rents Falling In Real Terms

New figures showing rents have dropped, when set against inflation, prove the market is working, says the RLA. Private rental prices paid by tenants in the UK rose by 1.3% in the 12 months to July 2019, unchanged since May 2019.Inflation over the same period was:

·         2% as measured by CPI(H) which includes owner occupiers’ housing costs.

·         2.1% as measured by CPI.

·         2.8% as measured by RPI.

This means a real term fall in private rents. More can be found in the Index of Private Housing Rental Prices.

https://www.housingnet.co.uk/pdf/Index_of_Private_Housing_Rental_Prices,_UK_July_2019_(1).pdf

U.K. Adds Housing To List Of Inflation Measures

The U.K.’s chief statistician said a measure of inflation including housing will become the favoured gauge of consumer prices from March.  CPIH -- the consumer prices index including owner-occupiers’ housing costs -- will be the “preferred measure” of inflation for the Office for National Statistics. Switching to the new index will address several flaws and limitations in alternative price measures and simplify the current plethora of different gauges. A spokesman said: “At the moment we have an alphabet of inflation measures so it’s important there’s more clarity about what we think inflation is doing. By including housing costs, CPIH is a better measure of inflation that people face up and down the country.” Read more on the Bloomberg website.

Inflation: Housing – Parliamentary Written Answer

Dr Andrew Murrison:  To ask Mr Chancellor of the Exchequer, if he will make it his policy to reflect house prices in the calculation of inflation.

Simon Kirby: Inflation statistics are produced independently of government by the Office for National Statistics (ONS). The current main measure of inflation is CPI. This does not include house prices as these are an asset price and in line with international practice are not included in a consumer price index. However, it does include some costs associated with housing, such as rental prices and the costs of renovating and repair and maintenance of homes. The ONS also produces CPIH, which does include housing costs but is currently undergoing development work after the UK Statistics Authority found faults in its production.

Inflation Gauge for Housing Costs Loses 'Official Statistic' Status

A measure of inflation launched to better reflect housing costs will no longer be treated as an official national statistic while it is being improved, the statistics authority has said. The CPIH index was introduced in March 2013 and had been touted as a future price stability benchmark for the Bank of England. The bank currently uses the consumer price index (CPI). The new measure was designed to address the fact that CPI does not include most housing costs faced by people who own their homes, including mortgage payments and maintenance. Last year the UK Statistics Authority upgraded CPIH from an experimental statistic - defined as being in the testing phase and not yet fully developed - to an official national statistic. But it has now said statisticians had found ways to improve CPIH and that the measure will revert to experimental status, suggesting its use as a benchmark for the BoE could be a long way off. Read more on Yahoo News.

Treasury May Change Inflation Target to Include Housing Costs

Britain's headline measure of inflation may be modified to include housing costs, after a top Bank of England official revealed it had held further talks with the Treasury about switching to a more “useful” gauge of price rises.  Andy Haldane, the Bank’s incoming chief economist, told MPs that Bank staff had held technical discussions with the Treasury to assess whether it would be appropriate to switch the Bank's 2pc target from the consumer prices index (CPI) to the new CPIH measure, which was introduced in March 2013. CPIH includes housing costs such as mortgage interest payments, which represent about 10pc of consumer spending.  Mr Haldane described CPIH as “a conceptually and practically more useful measure of a typical consumption basket”.  Read more on the Daily Telegraph website.