Comparing Rents and House Prices Recent pattern of social and private sector rents and lower...

Comparing Rents and House Prices

Recent pattern of social and private sector rents and lower quartile (LQ)

house prices in England

Relationship between private sector rents and house prices: England

350.00300.00250.00200.00150.00100.0050.000.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00

ren

t

R Sq Linear = 0.683

Relationship between social sector rents and house prices: England

350.00300.00250.00200.00150.00100.0050.000.00

90.00

80.00

70.00

60.00

50.00

40.00

30.00

net_

ren

t

R Sq Linear = 0.602

Relationship between rents and house prices: England

• The correlation coefficient (R) between private rents and LQ house prices was 0.826.

• Private rents and house prices had a significantly strong positive relationship.

• R between social rents and LQ house prices was 0.776. • Social rents and house prices had a reasonably strong positive

relationship for the observation period.

• Thus, social rents and private rents are significantly positively related -- R between private rents and social rents was 0.827.

Relationship between rents and house prices:

Regions • Rs between social sector rents and private sector rents: local authorities across the

English regions: 2002/03 to 2005/06

East 0.730 East Midlands 0.355 London 0.071 North East 0.045 North West 0.187 South East 0.446 South West 0.442 West Midlands 0.442 Yorkshire and the Humber 0.184

House price vs. Social and Private sectors rents : East

210.00180.00150.00120.0090.0060.00

200.00

180.00

160.00

140.00

120.00

100.00

80.00

60.00

private_rentLQ_house_price

social_rentLQ_house_price

private_rentLQ_house_price

social_rentLQ_house_price

R Sq Linear = 0.488

R Sq Linear = 0.635

• The East showed a particularly significant positive relationship (R = 0.730) between social and private sector rents.

• The scatter patterns of local authorities in the East showed significantly positive relationships between rents and house prices both for the social sector and the private sector.

• R for social = 0.697, R for private = 0.797

House price vs. Social and Private sectors rents : London

350.00300.00250.00200.00150.00100.00

300.00

250.00

200.00

150.00

100.00

50.00

private_rentLQ_house_price

social_rentLQ_house_price

private_rentLQ_house_price

social_rentLQ_house_price

R Sq Linear = 0.058

R Sq Linear = 0.741

• London showed a weak positive relationship (R = 0.071) between social and private sector rents.

• The scatter patterns of the local authorities in London showed significantly positive relationships between private rents and house prices.

• The relationships between social rents and house prices was weak (but positive).

• R for social = 0.240, R for private = 0.861

House price vs. Social and Private sectors rents : NE

120.00100.0080.0060.0040.0020.00

100.00

75.00

50.00

private_rentLQ_house_price

social_rentLQ_house_price

private_rentLQ_house_price

social_rentLQ_house_price

R Sq Linear = 0.137

R Sq Linear = 0.113

• The NE showed a weak positive relationship (R = 0.045) between social and private sector rents.

• The scatter patterns of the local authorities in the NE showed weak positive relationships between social rents and house prices.

• The relationship in the NE between PRIVATE rents and house prices was also weak (but positive).

• R for social = 0.370, R for private = 0.336

Discussion

• At the national level, there is strong relationship between rents and house prices.

private sector: market discipline social sector: rent restructuring with market elements

• However, in London and the NE, weak positive relationships. London: social sector NE: both sectors

• Social sector rents in London: reflecting affordability and target rent regime.

• Rental markets in NE: hinting that the region is affected by other determinants of rents than house prices.

• Need for more detailed analysis of these atypical regions? And cities within them?

London’s position in relationships to social rents, private rents and house price

S. E (s)

East (p)

S. E (p)

S. W (p)

East (s)E. M (s)London (s)

N. E (s)

N. W (s)S. W (s)

W. M (s)Y & H (s)

national equivalent (s)

national equivalent (p)

E. M (p)

London (p)

N. E (p)

N. W (p)

W. M (p)

Y & H (p)

0

100

200

50,000 100,000 150,000 200,000

LQ house price (£s)

Weekly

avera

ge r

ent

(£s)

Regions above/below the national rates of return for social and

private sectors

Social Sector Rents

Private Sector Rents

above below

above North East East Midlands

North west West Midlands

Yorkshire and the Humber

below London East

South East

South West