Rents soar to (another) record high

CLAPTON

mwpt wrote: »

If you say so. You could also say that in any other business massive reduction of primary cost (mortgage rate) would have led to cost reductions passed on the 'customer'. Didn't happen. So I think your predictions make sense in some theoretical way but don't explain the actual observed behaviour of a chaotic system. So either, it is behaving as you'd expect a chaotic system to behave, unpredictably, or we are able to make predictions. Scientific method mandates that we make testable predictions. How will we know who was correct?

On a note I touched on earlier, if tenants do in fact suffer because of this, then some would be buyers should gain.

chaotic systems behave predictably

wotsthat

mwpt wrote: »

If you say so. You could also say that in any other business massive reduction of primary cost (mortgage rate) would have led to cost reductions passed on the 'customer'. Didn't happen. So I think your predictions make sense in some theoretical way but don't explain the actual observed behaviour of a chaotic system. So either, it is behaving as you'd expect a chaotic system to behave, unpredictably, or we are able to make predictions. Scientific method mandates that we make testable predictions. How will we know who was correct?

On a note I touched on earlier, if tenants do in fact suffer because of this, then some would be buyers should gain.

You're wrong that an increased input cost will be absorbed by a single market participant in perpetuity. Only in the most inefficient market would this be the case. We know I'm correct by using logical thought.

I have no idea whether future rents will be up down or sideways though. If forced I think good times are ahead for wealthier landlords (a continuing trend) and renters who are in a position to buy. I'm afraid those who choose to rent because they have no choice will keep getting the shaft. Those renting waiting for the crash will maintain a gloomy persona.

I tend to think that's how life works. Whatever changes happen those who were doing OK keep doing OK and vice versa.

cells

mwpt wrote: »

It may or may not. A landlord could sell with sitting tenants to another non highly leveraged landlord at a price where the current rent makes a viable return. Perhaps current tenants must move and their rent was at market price, so they find a similar property for the same price. Or perhaps their rent was a bit below market price, so they must either relocate or pay a bit more. Perhaps the landlord sells to OOs who were previously renting. If they can afford to buy they may be at the high end of tenant quality, frees up one tenanted house, removes another. Perhaps your density stats are true and maybe OOs benefit for once by some slightly stifled or negative HPI and tenants must pay a little more.

It is way too complicated to predict in my opinion.

My best guess: rents carry on rising, at about around the same rate as they have been doing with landlords claiming this as a victory against their #TenantTax and others saying, well rents were rising anyway.

*shrug*

My guess is that the new taxes will add 3%-4% to rents over a period of 10 years. That will not be noticeable on a yearly time frame.

That is about £2 billion a year extra rent from tenants.
Landlords who are not geared and intend to hold on for many decades will benefit from higher rents while landlords who are geared will lose out as the rent increases will be less than the tax increase.

mwpt

CLAPTON wrote: »

chaotic systems behave predictably

That statement is incorrect as it stands.

It depends on time frame, accuracy of desired prediction and accuracy of measuring current state.

So in a sense you can make predictions, which may or may not have any real world bearing or application.

mwpt

wotsthat wrote: »

You're wrong that an increased input cost will be absorbed by a single market participant in perpetuity. Only in the most inefficient market would this be the case. We know I'm correct by using logical thought.

I have no idea whether future rents will be up down or sideways though. If forced I think good times are ahead for wealthier landlords (a continuing trend) and renters who are in a position to buy. I'm afraid those who choose to rent because they have no choice will keep getting the shaft. Those renting waiting for the crash will maintain a gloomy persona.

I tend to think that's how life works. Whatever changes happen those who were doing OK keep doing OK and vice versa.

If interest rates rose 2% would this count as a cost to landlords, passed on to tenants? Why did it not work in reverse?

cells

mwpt wrote: »

If you say so. You could also say that in any other business massive reduction of primary cost (mortgage rate) would have led to cost reductions passed on the 'customer'. Didn't happen. So I think your predictions make sense in some theoretical way but don't explain the actual observed behaviour of a chaotic system. So either, it is behaving as you'd expect a chaotic system to behave, unpredictably, or we are able to make predictions. Scientific method mandates that we make testable predictions. How will we know who was correct?

On a note I touched on earlier, if tenants do in fact suffer because of this, then some would be buyers should gain.

Its very difficult to measure small swings as we cant run experiments on the economy as we only have one economy to go with.

Given the choice of rents going up, rents going down, rents staying exactly as they are. I think rents will go up with more taxes. But only marginally perhaps only 3% over 10 years which is difficult to measure and individually not a lot. But collectively it would cost renters in the region of £2B annually.

cells

mwpt wrote: »

If interest rates rose 2% would this count as a cost to landlords, passed on to tenants? Why did it not work in reverse?

Interest rates going up 2% would result in higher rents, just as interest rates going down 2% would result in lower rents. In both cases it wont be instant and it will be a modest figure. Something like a 3% movement in rents over a 5-10 year period is virtually undetectable in all the other variables which tend to increase rentals annual by about local gva growth

mwpt

cells wrote: »

Interest rates going up 2% would result in higher rents, just as interest rates going down 2% would result in lower rents. In both cases it wont be instant and it will be a modest figure. Something like a 3% movement in rents over a 5-10 year period is virtually undetectable in all the other variables which tend to increase rentals annual by about local gva growth

So you're saying that since around 2009, a down trend of mortgage rates of around 4 or 5% has resulted in rents being suppressed by some huge amount? They would be a lot higher now otherwise?

cells

mwpt wrote: »

So you're saying that since around 2009, a down trend of mortgage rates of around 4 or 5% has resulted in rents being suppressed by some huge amount? They would be a lot higher now otherwise?

Mortgage rates have not been suppressed that much unless you were on a lifetime tracker which I would guess very very few were. rates maybe down about 2.5% for most

And yes I think the lower mortgage rates have resulted in lower rents. But its going to be lost in the general increases due to other factors. I dont know how much by but if we go with 4% spread across 10 years its not all that noticeable.


There is also some human emotion at play. For instance I have a business and one of our products I am 100% certain I can put the price up by 50% and overall profit would go up. I've been so reluctant to do so especially since the costs of making the product have fallen I would feel guilty. The logical business decision would be to up prices the market can bear it but I just cant do it. If my input costs rise however that gives me the excuse (to myself) to justify the 50% price increase (although the input price increase would be negligible). Maybe this is why inflation seemed to feed on itself and deflation seems to feed on itself. Anyway the point is, there will be lots of landlords who have not put the rent up for years thanks to their own costs going down. If their costs start going up be it tax or regulations or interest rates then they will be more inclined to write that letter to the tenant saying sorry buddy but your £1000 rent thats been the same for 10 years is going to be put up to £1500 as my costs have gone up. The alternative letter of sorry buddy but your rents going from £1000 to £1500 cos im an !!!!!!! is a bit harder to write

mwpt

So, when the time comes for the banks to raise rates, I guess we'll see Operation Tenant Shield soar into another gear and maybe another catchy hashtag of #TenantCharges.

Anyway, you both make some points which I will consider, and then probably reject. I expect you'll do the same for mine.