MSE News: Rents rise to record high

brit1234

Its good to know these same landlords are being bailed out by the lowest interest rates in history. The idea would it would keep the costs down.

Letting agents have some of the blame as well.

I say cancel the tax relief on these buy to let landlords.

anselld

brit1234 wrote: »

Its good to know these same landlords are being bailed out by the lowest interest rates in history. The idea would it would keep the costs down.

Letting agents have some of the blame as well.

I say cancel the tax relief on these buy to let landlords.

Raising tax and interest rates is only going to put more upward pressure on rental prices. You won't be able to strike against renting and buying unless you want to live in a tent!

Pincher

They say Gadaffi always carried a tent to sleep in when he went overseas. No hotel bills. Maybe he's a fellow MSE?

Regarding interest rate, try getting a BTL mortgage at all.
The juicy low rates are for owner occupier only.
It's only the lucky ones that are on BOE+1.75% for BTL.

There is a guy who got married, bought in 2007 for living in, fixed for five years at roughly 6%. Got divorced, can't afford the mortgage, so is renting it out. Let's see what happens when he tries to re-mortgage with a tenant in situ in 2012. On a BTL basis, he will be lucky to get a 4% tracker.

HAMISH_MCTAVISH

brit1234 wrote: »

Its good to know these same landlords are being bailed out by the lowest interest rates in history. The idea would it would keep the costs down.

Letting agents have some of the blame as well.

I say cancel the tax relief on these buy to let landlords.

Never mind though Brit, I'm sure you'll have a couple of months in the middle of winter where you can say rents are falling, as they do every year at that time. In fact, I seem to recall you being particularly vociferous about it last winter.

Yet you've been strangely quiet on the subject for the last 6 months or so.:)

brit1234

Don't worry Hamish I have cheap rent in Chelsea. It allows me to save an even bigger deposit and take advantage of the continuing house price falls.

HAMISH_MCTAVISH

brit1234 wrote: »

Don't worry Hamish I have cheap rent in Chelsea. It allows me to save an even bigger deposit and take advantage of the continuing house price falls.

:rotfl:

Only if you're planning to move from Chelsea to the third of areas in the country where prices are actually falling.

If you're planning to move to the two thirds of areas where prices are stable or rising, then that plan has a flaw....;)

brit1234

HAMISH_MCTAVISH wrote: »

:rotfl:

Only if you're planning to move from Chelsea to the third of areas in the country where prices are actually falling.

If you're planning to move to the two thirds of areas where prices are stable or rising, then that plan has a flaw....;)

Hamish they are falling in the vast majority of the UK or don't you look at Land Registry, Halifax or Nationwide figures.

mummyplus3

Blimey So glad Im out of the private rental market now the prices are getting ridiculas, I was lucky enough to get a really good deal on my 2nd rental property and now am in a LHA property the difference in rent costs is insane!

HAMISH_MCTAVISH

brit1234 wrote: »

Hamish they are falling in the vast majority of the UK or don't you look at Land Registry, Halifax or Nationwide figures.

False.

According to both RICS and HOMETRACK, the blunt averages of national and regional house price indices mask the fact that prices are only falling in around 35% of local areas in the UK. They're rising in around 10% of areas, and stable in the remaining 55%.

For two thirds of people, they are not falling but instead are stable or rising. However, because prices are falling in more areas than they are rising, although still a minority, this creates a downwards skew to the indices.

Therefore your oft-repeated assertion that "prices continue to fall" is only accurate for a minority of areas. And fallacious for the majority.

Radshire

It's definitely a supply and demand issue.

However, it might be worth reflecting on why the supply and demand is the way it is. I'm no economist, and I'm sure the following is full of flaws, but here's my take (which is only my opinion).

Back in the pre crunch times money was cheap. Worse than that, leveraging assets was a good way to get more of this cheap money. If you were lucky enough to be in a position to, you could obtain a house with no deposit (heck some people had > 100 % LTV mortgages). Once you had an asset, you could leverage it to get more money (loans, credit cards, hire purchase and for those with BTL assets, more BTL assets). Since the banks were securitizing the loans, mixing the good with the bad, and selling them on, all they needed was a good supply of borrowers willing to borrow money. This has led to the situation being rather precarious for those borrowers who leveraged their assets at a market value above what they are now. Since the majority of people do not actually want to default on their loans, people are now working to de-leverage and pay down debt. The government is also keen to see people remain out of trouble; interest rates are low and the UK tax payer is actually helping people to get back on their feet (including those with their portfolio of BTL loans)

Now that banks are unable to securitize loans as much as they used, to the supply of money has reduced - specifically that to sub-prime and higher risk which is demonstrated through the higher deposit requirements for mortgages. Furthermore, the supply of borrowers has also dried up as people are now willing to pay off household debt rather than take on more. These factors make the demand for rental properties higher as people have to now save to buy their house (as opposed to getting 100 % LTV loans).

I've just bought. I'm sorry to say that my mortgage is more than I was paying in rent, but that's because my LL hadn't increased rent for he 4 years I was a resident in his house. Furthermore, he marketed the property before we moved out, and the first people to come and see it took it - thus demonstrating the demand for rentals. However, I'm glad that I bought now because I believe that, unless there is a big 'correction' in the housing market, the privilege of owning your own home will be afforded to fewer than is the case today. In my opinion, there is nothing necessarily wrong with the UK model shifting from one of home ownership to rentals which is why I find firsttimetom's comment in post #10 rather pessimistic. There are countries where renting property for the majority is the norm (e.g. I have a friend who lives in Germany and states that this is the case). However, I don't think that under current conditions this will work in the UK as the high demand means that LL's can continue to increase yields (by either increasing rent, or decreasing costs in the form of property maintenance, or of course doing both!).

The correction required is not all one of money supply either as there needs to be a good supply of housing in the first place. Whilst I tend to agree with brit1234 (post #12) I also agree with Anselld (post #13) who discuss the low interest rates and BTL tax relief. I believe that the effect of an increase in either needs to be considered over different timescale. In the short term any increase in landlord costs is likely to be passed onto the consumer in the form of higher rents. However, if such rises in taxes or the cost of borrowing were to make the proposition of BTL less attractive, there would be fewer businesses in this field and, thus, more houses available for home ownership bringing down house prices and affordability.