Rents predicted to rise 10% despite falling real incomes

Turnbull2000

http://www.guardian.co.uk/business/2011/may/31/housing-market-rents-mortgages

Landlords are expected to cheer the survey findings by property website Rightmove that give them a green light to jack up rents despite falling real incomes and persistently high unemployment.

Rising rents are luring an increasing number of buy-to-let investors. Of those who expect to buy a property to rent out in the next 12 months, 46% said they will be doing so for the first time. When asked for their reasons for investing in property, 43% said they were mainly attracted by yields, while almost a third stated it was because of the relatively poor performance of other investments such as shares.


Shipside said: "In locations where low capital values and good rental returns coincide rental property is hard to ignore as an investment option at the moment. With uncertainty about less tangible assets held in people's pension pots, bricks and mortar once again look a more solid investment as part of your retirement planning."

DannyboyMidlands

"almost a third stated it was because the relatively poor performance of other investments such as shares".

These amateur BTL'ers don't know what they're talking about and are a danger to themselves. Property is no longer the only game in town. If they'd been investing in stocks, commodities etc over the past 3 years they could have easily doubled their initial investment as well as receiving dividends of circa 5%.

Turnbull2000

DannyboyMidlands wrote: »

"almost a third stated it was because the relatively poor performance of other investments such as shares".

These amateur BTL'ers don't know what they're talking about and are a danger to themselves. Property is no longer the only game in town. If they'd been investing in stocks, commodities etc over the past 3 years they could have easily doubled their initial investment as well as receiving dividends of circa 5%.

Most people don't understand stocks and commodities. For the vast majority with concerns over dimishing pensions, with money to spare or borrow against their primary residence, BTL is the only game in town I'm afraid. Heck, even my sister's copper boyfriend is now looking to buy one, and a collegue at work with a substantial sum of money in the bank has recently bought two due to ultra-low interest rates.

DannyboyMidlands

Exactly my point. They don't know what they're talking about. As part of a balanced investment portfolio the odd BTL is fine but in my opinion too many people have all their eggs in one (low yielding, highly illiquid) basket.

HAMISH_MCTAVISH

DannyboyMidlands wrote: »

low yielding.

Gains from property, including capital growth and rental yield (imputed or realised) have outperformed gains from equities including capital growth and dividend re-investment over the last few decades by a long shot.

But I'll agree BTL had low rental yields for the last decade or two, the same transfer of stock from O/O to Rented that doubled rental stock in less than two decades, and increased property values by 7%, also decreased rental yields by closer to 50% in the same time.

Rents are only now getting back towards a semblance of normality in yield terms, (despite being at record highs in cash terms) but they'll climb much higher yet.

Thrugelmir

HAMISH_MCTAVISH wrote: »

Rents are only now getting back towards a semblance of normality in yield terms, (despite being at record highs in cash terms) but they'll climb much higher yet.

For yields to return to normality. Then the counter balance has to be a fall in capital values. A higher yield is required to compensate for the risk involved.

nembot

HAMISH_MCTAVISH wrote: »

Gains from property, including capital growth and rental yield (imputed or realised) have outperformed gains from equities including capital growth and dividend re-investment over the last few decades by a long shot.

But I'll agree BTL had low rental yields for the last decade or two, the same transfer of stock from O/O to Rented that doubled rental stock in less than two decades, and increased property values by 7%, also decreased rental yields by closer to 50% in the same time.

Rents are only now getting back towards a semblance of normality in yield terms, (despite being at record highs in cash terms) but they'll climb much higher yet.

We could replace fossil fuel with the methane produced from many of your posts, including this one....

Yields returning to normal, when and where?

HAMISH_MCTAVISH

Thrugelmir wrote: »

For yields to return to normality. Then the counter balance has to be a fall in capital values. A higher yield is required to compensate for the risk involved.

In bonds or other financial instruments that would be the expected relationship.

But property could easily enough see rent increasing by four times wage inflation, whilst prices are constrained by credit availability and only climb by twice wage inflation, for example. In that case both yields and prices would rise......for a while. Until the artificial constraint around credit availability was lifted, or the rising yields attracted investment capital from elsewhere. Then prices would eventually rise faster than rents, and yields fall.

Thrugelmir

HAMISH_MCTAVISH wrote: »

In bonds or other financial instruments that would be the expected relationship.

But property could easily enough see rent increasing by four times wage inflation, whilst prices are constrained by credit availability and only climb by twice wage inflation, for example. In that case both yields and prices would rise......for a while. Until the artificial constraint around credit availability was lifted, or the rising yields attracted investment capital from elsewhere. Then prices would eventually rise faster than rents, and yields fall.

With the debt overhang most likely to hamper growth for some years to come. Then it will be necessary to return to the basics of operational profitability to generate returns. The days of borrowing money, investing it, then sitting back in a deckchair watching it effortlessly grow. Isn't on the horizon at the moment.

Those that'll be successful will need to have a plan 'B'.

HAMISH_MCTAVISH

Thrugelmir wrote: »

will need to have a plan 'B'.

Just like those that thought waiting for a crash would be financially advantageous to them versus buying in 2004/5/6/7 etc....;)