Buy to let rents suffer a big drop

brit1234

Buy to let rents suffer a big drop



By Lorna Bourke | 00:01:00 | 26 February 2009


New figures confirm what independent commentators have been warning would happen for some time – the buy to let boom is over, rental returns are falling and tenants suffering unemployment are finding it just as hard to pay their rent as owner-occupiers struggling to meet their mortgage repayments.



Home sellers, unwilling to accept what they consider a silly price for their properties, have been turning to the rental market and letting them out. In many areas there is now a glut of available rental property.


The Findaproperty.com Rental Index reports that a surge in supply has pushed UK rental asking prices down by 1.2% over the month and 4.8% over the year.


Average rents in February 2009 were £830 per calendar month compared with £840pcm in January and £872pcm in February 2008. Findaproperty’s figures are based on information posted independently on their site from a total of over 444,000 sale and rental properties.


Not surprisingly, the fallout from the credit crunch and banking redundancies is taking its toll. In London, areas that are heavily dependent on City workers as tenants such as the City of London, Tower Hamlets and Canary Wharf, as well as Kensington & Chelsea are experiencing significant rental price falls, in some cases a drop of up to 11.7% equal to a fall in rental income of £221 a month. More affordable outer London boroughs are proving much more resilient.


Excess supply and falling rents is a pattern replicated across most of the UK regions. The North West experienced the worst decline – annual rental prices are down by 14.3% to £592pcm from £645pcm.


UK rental yields overall remain unchanged at 4.6% for the fourth consecutive month as a result of a decline in house prices.



The rental market has varied sig!nificantly across the UK, with rents declining by between 2.3% and 6.1% year on year. Attention has been focused on city centre flats which have seen dramatic price falls as a result of oversupply and a shortage of tenants able to pay a viable rent, sufficient to cover the landlord’s mortgage costs.



Findaproperty reports that rental asking prices have fallen by 14.3% in the North West over the past year, accelerating in February 2009 with prices plunging 8.2% on the previous month. This fall has been caused by a very significant increase in available stock, especially in the Manchester area, which has seen supply increase by 45.9% over the past year and now accounts for 57.8% of the available rental property in the whole of the North West area.


Findaproperty says thatthe clearest and most dramatic trend in the UK rentals market is the significant increase in stock levels. In the past six months the number of rental properties adver!tised on the website has almost doubled and is up 43% between September 2008 and February 2009. Over the past month alone, stock levels have risen by 8%.


However, demand is up too – although not by enough to soak up the increase in available property. Homebuyers, unwilling to commit to buying while prices are still falling and unemployment rising, are renting. FindaProperty reports that the number of enquiries for rental prop!erties is up 22% and enquiries to agents are up 8%.


But this rise in demand has been outstripped by the increase in supply and as a consequence properties are taking longer to rent. The average time a property is on the market has risen to 70 days, a 27% rise year-on-year, says the report. That is over two months when the landlord has no rent coming in. Better to accept a 10% cut in rent than have the property empty for over two months.


‘The credit crunch and the downturn in the sales market have led to a very significant increase in activity in the rentals market,’ commented Andrew Smith, head of research at Findaproperty. ‘Tenants are the real winners in this situation – they have a huge stock of property to chose from, often high-quality owner-occupier stock – and are in a strong position to negotiate on rents and/or services.’ Clearly in this environment landlords will have to upgrade their properties to compete and maintain rental levels.



‘According to some of our member agents, tenants are becoming more demanding as the market swings in their favour and landlords are now less likely to receive the uplift in rents at renewal that they might previously have achieved. Some landlords are offering extras such as cable and satellite TV, weekly cleaners or even improving their property to make it more appealing,’ says Smith.

Just a little update on the rental market. :eek:

http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=330562

stevetodd

brit1234 wrote: »

Just a little update on the rental market. :eek:

http://www.citywire.co.uk/personal/-/news/money-property-and-tax/content.aspx?ID=330562

Sorry but after wasting my time reading your previous posts (and the links) I have learnt not to bother as they are a complete waste of time, so I haven't bothered reading this one. Your posts are usually just pathetic nonsense. I'll leave it to someone else to find the flaws.

ps nearly forgot to mention on just 4.5 rental properties my interest payments have come down by 24k a year (just a little update on the BTL market)

Gorgeous_George

I got as far as the 4.8% drop over a year. Gosh, that'll hurt.

Still, fair play to Brit. Play a tune long enough and eventually people will hum it.

GG

stonethrower

stevetodd wrote: »

Sorry but after wasting my time reading your previous posts (and the links) I have learnt not to bother as they are a complete waste of time, so I haven't bothered reading this one. Your posts are usually just pathetic nonsense. I'll leave it to someone else to find the flaws.

ps nearly forgot to mention on just 4.5 rental properties my interest payments have come down by 24k a year (just a little update on the BTL market)

If you are worried about wasting your time reading Brit1234 messages why did you bother responding to it

socrates

I am a BTL LL as some of you already know.

Although I do not listen to a lot of what Brit says.

I still do not think we should be on here boasting about this or that - I too have a mortgage that was £1100 pcm and is now £300 pcm - the rent has stayed the same £1200 (net of all expenses)

My biggest qualm is this - and I have not yet had anyone who can explain the economics behind it.

How can the market/economy sustain this type of difference (the £1100 - £300)

I sense there will be some massive correction or some new tax that will attack this.

I just cannot put my finger on it....

dopester

socrates wrote: »

I just cannot put my finger on it....

It is called a massive "house price crash" which doesn't happen overnight, but over the course of a few years.

paintpot

I follow that sentiment. That's why I am not spending the extra I am now receiving. I am on a tracker which is fantastic at the moment but I am not getting excited about it because I foresee a huge reversal in the future. How long I just don't know (as no-one does) so I'm watching and waiting before I make any moves.

socrates wrote: »

I am a BTL LL as some of you already know.

Although I do not listen to a lot of what Brit says.

I still do not think we should be on here boasting about this or that - I too have a mortgage that was £1100 pcm and is now £300 pcm - the rent has stayed the same £1200 (net of all expenses)

My biggest qualm is this - and I have not yet had anyone who can explain the economics behind it.

How can the market/economy sustain this type of difference (the £1100 - £300)

I sense there will be some massive correction or some new tax that will attack this.

I just cannot put my finger on it....

socrates

dopester wrote: »

It is called a massive "house price crash" which doesn't happen overnight, but over the course of a few years.

If that is correct as you say then rents should crash by 30% lets say for arguments sake.

Somehow I cannot see that happening - the lending criteria is very tight and applications are being checked in triplicate.

So there may not be as many house sales as people think - subsequently still a demand for rentals (good ones mind)

lynzpower

What I cant believe is that Brit managed to post this without using this symbol above.

PasturesNew

I don't give a monkey's chuff about the London market ... never been there.

My rent won't go down, I can't see my landlord phoning me up and saying "hey, let's take 30% off your rent", which would be nice.

I also can't see 1-bed places coming into my price range ... at the moment the cheapest one of those is just 100 yards away, but it's 20% more than this place is.

If I were on benefits/LHA I'd snap that up though as it's within the LHA 1-bed amount... I'm just too tight to go the extra out of my own pocket.

RDB

socrates wrote: »

I am a BTL LL as some of you already know.

Although I do not listen to a lot of what Brit says.

I still do not think we should be on here boasting about this or that - I too have a mortgage that was £1100 pcm and is now £300 pcm - the rent has stayed the same £1200 (net of all expenses)

My biggest qualm is this - and I have not yet had anyone who can explain the economics behind it.

How can the market/economy sustain this type of difference (the £1100 - £300)

I sense there will be some massive correction or some new tax that will attack this.

I just cannot put my finger on it....

Its a good point.

Surely cutting the base rate so much has just made things worse in the long run. The short term maybe to delay mass repos, but its just delaying the problem and making it worse. The banking system is so close to failing completely so to cut the income by so much just seems crazy. How long can these low rates last?

Was it worth it to try and put off a repossession crisis like the UK has never seen before? Not if that crisis is going to be even worse the longer they delay it.