Rents fall at fastest rate on record

Gorgeous_George

When interest rates rise, the pressure on rents will be upwards. Increased costs will necessarily mean increased rents.

However, the pressure will lag rises in base rates. Most BTL mortgages are already prices as if base rates were 4% - 5%. We can have some significant movement before lenders will need to raise rates.

Risng rates will mean lower house prices and more demand for rental properties.

GG

MissMoneypenny

Gorgeous_George wrote: »

When interest rates rise, the pressure on rents will be upwards. Increased costs will necessarily mean increased rents.

Not if there is still a glut of rental properties like there is now. People who can't sell are renting houses out, causing more rentals than there are tenants and forcing the rental prices down. Supply and demand.

Unless these accidental landlords can sell their property, they will be competing for the tenants too. It's not just BTLers that are looking for tenants.

Gorgeous_George

I fear for the accidental landlords. Holding on to property when the crash starts seems to make so much sense. They'll sell when the market recovers.

Problem is, there's no Plan B. What happens when the market does not recover in their lifetime?

I suppose the problem will be even greater for the BTLer who planned to sell but I suspect most probably bought without such a plan.

When rates rise there will be carnage - and a few bargains to be had.

GG

brit1234

Rents will continue to fall as unemployment rises, It was on wakeup to money this week the huge rise in rent defaults this month. If any landlord is stupid enough to raise rents then they risk increased void periods.

Rents will fall for the rest of this year I predict

lynzpower

Agreed.

I saw a knight frank advert today in the Docklands Advertiser ( free sheet for Canary Wharf & surrounds) that said they ( along lines of ) Hope to be confident that the rental market and hopefully August will return to 5% yeild for thier Landlords.

This bothered me. If LLs are not getting the best yeilds now, when IRS are so low, then that is a REAL downward pressure in rents.

However, in some areas LHA will prop up rental prices. In terms of statistics any way.

harryhound

If I were the next bankrupt government running this 11% and rising deficit nation, the first thing I would tax is landlords' profits if any. So pray for a Tory government but that is no guarantee that it won't happen.

At the moment BTL landlords are being dispossessed by "receivers of rents" appointed by mortgagees. Quantitative easing is putting very cheap money into the hands of banks so they can afford to service it with existing rents, even when the mortgagor defaults on the mortgage.

Increased interest rates would act just like a land tax, they cannot be passed on to redundant tenants being funded by the state.

It is now about 200 years since David Ricardo worked out that the price of land was high when rents were high and rents were high when the demand for corn pushed up its price. The chain dos not work the other way round. Landlords cannot force up rents just because their cost of borrowing has increased.
It is about 100 years since Henry George proposed a single land tax for USA and came close to being elected.
Eventually enough landlords will go bust and enough repossessions will force down property prices so that new landlords can afford to buy and finance their purchase.

http://journals.cambridge.org/action/displayAbstract;jsessionid=06958F14CD9288B776C35B838D9A2341.tomcat1?fromPage=online&aid=4294368
http://www.cooperativeindividualism.org/george_singletax.html

bristol_pilot

I'm looking forward to the next stage when blocks of near-empty city centre 'luxury apartments' are bought up by local authorities to house the growing ranks of the unemployed, problem families and assorted chavs. Those who paid £300k for their 2-bed will regret hanging on in the hope that prices will rise. Not seen it in Bristol yet though.

lynzpower

bristol_pilot wrote: »

I'm looking forward to the next stage when blocks of near-empty city centre 'luxury apartments' are bought up by local authorities to house the growing ranks of the unemployed, problem families and assorted chavs. Those who paid £300k for their 2-bed will regret hanging on in the hope that prices will rise. Not seen it in Bristol yet though.

That is certainly not happening here in London.

However I have heard/ seen a few very prestigeous sites that were being privately / s. luxury built now being handed /sold to Housing association

The Freemans Building on Clapham Road was a Gallliard endeavour, so now they are in the soup, the project seems to have IIRC A NOtting hill housing trust sign offering part rent/ part buy for key workers. I believe the Walthamstow dog track site is gonig to be housing association. I hear about a number of other land deals such as this.

I think whats happening is that this buit of governmetn money that Brown said he'd trickle down and it is doing, to housing asociations to buy stock to rent at intermediate or sell at SO - ie mixed from the outset.

I mist say I was surprised to see the Freemans building turned to HA. ( they are still building it ) http://www.arbitragegroup.co.uk/Properties/Clapham%20Road.pdf this is pretty much the only nice building on that whole road.

Thrugelmir

lynzpower wrote: »

Agreed.

I saw a knight frank advert today in the Docklands Advertiser ( free sheet for Canary Wharf & surrounds) that said they ( along lines of ) Hope to be confident that the rental market and hopefully August will return to 5% yeild for thier Landlords.

This bothered me. If LLs are not getting the best yeilds now, when IRS are so low, then that is a REAL downward pressure in rents.

However, in some areas LHA will prop up rental prices. In terms of statistics any way.

5% yields :eek:

Is that suppose to be good........

Gorgeous_George

lynzpower wrote: »

This bothered me. If LLs are not getting the best yeilds now, when IRS are so low, then that is a REAL downward pressure in rents.

Interest rates are not low for BTL mortgages with 6% - 7% being typical.

Reluctant LLs with residential mortgages should be selling now or battening down the hatches with a a fixed rate. They may well think that they are doing ok for now (when comparing BTL rates with their residential mortgage rate) but when rates rise it will be too late to grab that fix. With no sign of a return to hideous property prices, the pain will be unbullable.

GG