Rents Falling - FT

Walletwatch

!!!!!!? wrote: »

To be honest, I think the BTL market entrants dried up around the same time as the market turned. I suspect that they were in fact playing a large part in holding the market up until that point.

This is more good news for would-be FTBs as it should suppress future demand for housing from BTL investors and thus allow the market to bottom at a lower level.

Agreed. It also is an indication of why this particular economic cycle is proving to be more severe than earlier ones. With higher peaks when BTL activity was at crazy levels, lending was indiscreet and everybody wanted to buy rather than rent, followed by the lower troughs were access to credit is virtually non-existent, house prices are falling and FTB-ers have an incentive to wait and rent at lower levels.

So much for Brown's end to boom and bust, this scenario is just boom and bust with intensity levels never seen before.

EdInvestor

!!!!!!? wrote: »

You called it right - initially a rise in rents but then as money starts to get tight, a fall.

The fall is not caused by money being tight but by increased competition among landlords.There are more properties being made available for letting because people can't sell.

On the other hand vendors can't sell because buyers can't buy, due to lack of mortgages, so there has also also been an increase in potential tenants at the bottom end partiularly.

In London no doubt there has been a decline of top end tenants due to job losses in the City.But as you say, no doubt each different area will display this supply and demand equation differently.

Average UK rents, which had been rising rapidly, have now stabilised.... While rents in parts of the UK continue to rise, the picture is very different in prime areas of London.
The slide comes as so-called reluctant landlords – owners who have been unable to sell their properties and let them out instead – have put pressure on rental prices. Agents are also reporting a decline in demand from corporate tenants.

PasturesNew

Lower rents will lower the burden of paying high rents for people on benefits... except there'll be more of them with the job losses coming up.

dopester

EdInvestor wrote: »

The fall is not caused by money being tight but by increased competition among landlords.There are more properties being made available for letting because people can't sell.

True about more properties coming up for let, but people are losing their jobs, being asked to work less hours, take a paycut. Money is TIGHT.

There are clear knock-on effects and !!!!!! is right. Even private schools are under pressure as parents struggle (today's Telegraph).

My tennis club (one luxury) has seen membership fall significantly. They want to up fees for next year to account for the loss of revenue but I doubt I'll rejoin.

Money is tight and getting tighter, and we've not even begun to experience the real pain yet of serious cutbacks and job losses, both in the private and public sectors.

Private schools face a grim examination amid the credit crisis

By Elizabeth Grice
Last Updated: 1:11AM BST 02 Aug 2008

Girls in blue are smiling and chatting on the grass in the leafy, sunlit grounds of Wentworth College. The stout, grey stone building that is their private school squats like a stately home on the cliff top, from which you can almost smell the tang of salt spray from Bournemouth beach. The headmistress, Sandra Coe, insists on the uniqueness of each girl, and speaks of her pride that the school offers “an education that complements the life of the modern family”.

There is one flaw in this attractive image of a high-achieving school, as presented on its website: on Monday, it was blown to bits. With less warning than it would take to ring a class bell, the 19th-century secondary school – which had been about to go co-educational to reverse its declining numbers – was put into receivership, and teachers on holiday were told they had lost their jobs.

MissMoneypenny

EdInvestor wrote: »

The fall is not caused by money being tight but by increased competition among landlords.There are more properties being made available for letting because people can't sell.

There seems to be a very big time gap here:-

Some sellers won't drop their prices, so want to rent out until the market picks up.

Those who don't want to buy yet are happy sellers are doing this, as it means there are more rentals available and rents will drop.

When the potential buyers think the market has bottomed out, they will buy.

What will those original sellers do then for tenants, until the market rises? How will they pay their mortgages?

PasturesNew

dopester wrote: »

My tennis club (one luxury) has seen membership fall significantly.

They are a luxury aren't they! I've always wanted to play tennis, looked into it about 4 years ago and was staggered at the cost!

When I was 15 I used to take a racquet (onlly a couple of wonky/broken strings ... and the shape wasn't too warped) and an old ball down to the school and bash the ball against a wall. I think that's the way to do it ....

EdInvestor

MissMoneypenny wrote: »

Some sellers won't drop their prices, so want to rent out until the market picks up.

It's not as simple as that.A seller may be willing to drop a price to his buyer, but must be sure that he gets enough to make his own new purchase viable.If his vendor won't drop, he's in trouble. People can't take the risk of being the muggins who is the only one to reduce the price, when no-one else has yet moved.

IMHO this problem will remain until something resembling historical normality returns to the mortgage market.

mewbie_2

EdInvestor wrote: »

IMHO this problem will remain until something resembling historical normality returns to the mortgage market.

...and the housing market. IMHO.

dopester

EdInvestor wrote: »

People can't take the risk of being the muggins who is the only one to reduce the price, when no-one else has yet moved.

Fine, let your types keep their prices static. The people next door, or the guy across the road, will significantly lower their price and decide the market price for you.

Some may be able to take a big hit now, knowing there is worse to come in the future, and still come out smiling... and more still will be forced to cut, having lost their job(s) or taken a pay cut, less hours ect.

Generali

EdInvestor wrote: »

IMHO this problem will remain until something resembling historical normality returns to the mortgage market.

The mortgage market has gone back to normal in terms of total lending, it's the past 2 years that have been abnormal. The reason why lending volumes have collapsed is because house prices are so expensive the funds can only pay for a smaller number of purchases.

Figures for mortgage lending in May 2002-May 2008 (so as not to need seasonal adjustment):

....Month.........Total Lent......% change on May 2002
May 2002: £20,300,000,000...................na
May 2003: £22,300,000,000...................+10%
May 2004: £24,100,000,000...................+19%
May 2005: £22,400,000,000...................+10%
May 2006: £29,100,000,000...................+43%
May 2007: £31,500,000,000...................+55%
May 2008: £24,500,000,000...................+21%

Source: CML spreadsheet ML1[1]