Just to Make Things Completely Clear

Filo25

mwpt wrote: »

You are making an argument against something I never said. I said that on this forum there are two schools of though, sometimes held by the same people at the same time, which are orthogonal.

1) As we shifted away from higher OO rate since 2002, it meant more renters in the system and more demand, therefore higher rental prices.

2) If we shift back toward higher OO rates (though the anti BTL measures) this will reduce rental properties and therefore higher rental prices.

You don't need to factor in a housing shortage to see that these two arguments contradict each other, yet these are the arguments being made by the same people on this forum, including your original post.

I suppose you can (to an extent) square the circle on this one by saying that actually high demand due to a strong economy in London, pulling in people to work in London from across the UK, the EU and indeed the world, combined with significant investment in prime and super-prime property from overseas, helped push London property valuation and rental prices significantly higher.

Theory at least would suggest that falling owner occupation and a higher proportion more densely populated BTL/rental property, would help to slightly restrain that growth, a reversal of that trend could have the opposite effect and have some upward pressure on rental values, although how significant that is likely to be is anyone's guess, and could more than likely be more than offset by other trends in the market anyway, (lower overseas investment or possibly overseas investors becoming net sellers)

CLAPTON

Filo25 wrote: »

I suppose you can (to an extent) square the circle on this one by saying that actually high demand due to a strong economy in London, pulling in people to work in London from across the UK, the EU and indeed the world, combined with significant investment in prime and super-prime property from overseas, helped push London property valuation and rental prices significantly higher.

Theory at least would suggest that falling owner occupation and a higher proportion more densely populated BTL/rental property, would help to slightly restrain that growth, a reversal of that trend could have the opposite effect and have some upward pressure on rental values, although how significant that is likely to be is anyone's guess, and could more than likely be more than offset by other trends in the market anyway, (lower overseas investment or possibly overseas investors becoming net sellers)

that's a fair summary of the situation and clearly illustrates how the people of London (especially the young ) will see a continuing fall in their housing standards due to the rise in immigrant population.

Filo25

CLAPTON wrote: »

that's a fair summary of the situation and clearly illustrates how the people of London (especially the young ) will see a continuing fall in their housing standards due to the rise in immigrant population.

We always come back round to this

That said I don't think you can ignore the impact of immigration on the Demand side of the housing market.

The problem for London remains that a lot of that immigration and internal migration is required to support the current state of the London economy and its future growth, it has been a consequence of London's relative success in recent years.

westernpromise

My understanding of what rents are doing in London / SE is that since the early 2000s, people have been flooding in and bidding up the price of accommodation in the housing stock. This is much the same in capacity as it has always been, hence rents and house prices have both gone up. When house prices go up as well then rents tend to lag them or stagnate, because buying is clearly better value. When house prices come down, rents go up because renting now becomes clearly better value. This has been true of my place; in 2004 it let at £1700 and today it’s £2400. Over the same time the value of the property has roughly doubled. So the yield has fallen about 25%, even while going up slightly in nominal terms. If house prices were to fall I’d expect rents to go up.

The area of London my flat is in looks to have come off to me just lately. Zoopla disagrees, but I’m now seeing 2-bedroom 2-bathroom flats with outside space offered for under £900k in St John’s Wood. You can find similar flats in very good condition and often with access to a communal garden on offer in white stucco Maida Vale for under a million. This time last year any two-bed in Maida Vale was on offer at a million. So there’s been some softening but I think it’s more about the stamp duty than landlords, because yields have been dire around there for years. If you bought in back in 1998, great, but if you paid the 2010 price I’d guess you’re covering your costs.

westernpromise

kabayiri wrote: »

Controversial to say I know, but I have this feeling that every place needs it's equivalent of the slum area.

I'm remote from London, but the problem I see is the gentrification of absolutely every little bit of the city.

It's obviously complex, because I'm a fan of urban transit networks like the tram system in Greater Manchester, and these have the exact same effect of increasing the desirability of a wider area!

Perhaps. The thing is that there is a pesistent tendency for people to assume and assert that whatever is happening now is the aberration, and the past they can remember was the norm. You get this a lot with crash trolls banging on about "when interest rates return to normal i.e. 10%". The fact is that interest rates were above 10% for only 20 of the last 300 years and all 20 were between 1970 and 1995. Today's rates are actually a lot closer to the long-term norm - not the base rate, but the mortgage rate you can get. So the 2% may be the new normal for the next 30 years. I don't know but I would not be surprised.

In the same vein there is a frequent presumption that house prices must revert to some normal level. The fact is that house prices in Hong Kong, Singapore, Dubai, and New York have been stratospheric for decades. The buying power of the local salary is not only not a limit, it's not even a factor. Yes, I'm aware of Japan etc, but Japan was chiefly about Tokyo and Tokyo has never been an international city nor even a destination.

We could easily be looking at some sort of new normal for London. It wouldn't take much of a dip for me to use it to trade up for more space, and I expect most others would be the same. This in itself would be a factor limiting price falls.

mwpt

Filo25 wrote: »

I suppose you can (to an extent) square the circle on this one by saying that actually high demand due to a strong economy in London, pulling in people to work in London from across the UK, the EU and indeed the world, combined with significant investment in prime and super-prime property from overseas, helped push London property valuation and rental prices significantly higher.

Theory at least would suggest that falling owner occupation and a higher proportion more densely populated BTL/rental property, would help to slightly restrain that growth, a reversal of that trend could have the opposite effect and have some upward pressure on rental values, although how significant that is likely to be is anyone's guess, and could more than likely be more than offset by other trends in the market anyway, (lower overseas investment or possibly overseas investors becoming net sellers)

Absolute agreed, rents have risen in London because it suffered relatively less in 2008 than other locations and has boomed since then.

If most renters are would be owners, then curbing leveraged BTL lending is in theory in their long term interest even if it did result in slight rent increases. Government encouraged a boom in BTL, I believe I saw a document somewhere where they specifically said the PRS should meet the upcoming housing needs. They seem to be concerned this has overshot and now seem to be intent on restraining it somewhat. If this meant that rents were previously constrained then rents will rise a little more than they might have otherwise in the future, but this would help some would be owner occupiers.

Personally I'm inclined to view any rent rises in response to these policies as fairly muted and certainly not enough to save the worst of the highly leveraged landlords. They may have to sell the asset at a lower price at which either an OO will be tempted or another lower leveraged BTL can make the sums work. I don't think the numbers will be significant enough to exert large pressure on rents.

cells

If you want to increase ownership and reducing rentals you need to look at mortgage availability especially self certified. Prices in the North East are about 20% lower now than a decade ago and mortgages are about half the price. The cost of buying and financing a property has crashed yet ownership has not boomed and renting is now bigger there than it was a decade ago!

So why do you think and feel that the same happening in London will result in a different outcome?

What London needs is for 500,000 social homes, whole estates, to be sold off for a mix of owners and private rentals (with the estates added improved or rebuilt at higher density) and for most of the 1.25 million or thereabouts residents to be moved out of London to the rUK.
The government could sell the London social stock for £300k a unit, hand over £100k to the tenants to go buy in rUK outright and still have £200k a unit to spend on the NHS.

wotsthat

mwpt wrote: »

Personally I'm inclined to view any rent rises in response to these policies as fairly muted and certainly not enough to save the worst of the highly leveraged landlords. They may have to sell the asset at a lower price at which either an OO will be tempted or another lower leveraged BTL can make the sums work. I don't think the numbers will be significant enough to exert large pressure on rents.

If the numbers aren't that significant then there can't be that many, still to be defined, highly leveraged landlords about and any increase in OO's will be insignificant too.

I do wonder if the recent upsurge in sales of BTL's was, in fact, the 'worst of' the over leveraged landlords selling to less leveraged entrants. Good news for tenants - bad news for the exchequer.

Generali

cells wrote: »

If you want to increase ownership and reducing rentals you need to look at mortgage availability especially self certified.

If you think that more lending is required then fair enough but I don't see why mortgage fraud is a good thing. At some point banks need to account for the risks they're taking by lending and they can't do that if they lend any amount to any person.

cells

Generali wrote: »

If you think that more lending is required then fair enough but I don't see why mortgage fraud is a good thing. At some point banks need to account for the risks they're taking by lending and they can't do that if they lend any amount to any person.

who is talking about fraud and why does it have to be risky and why do we need internet addicts to decide that all banks need blanket policy?

I know one individual who lost their job, started self employment and moved towns. He has about 50-60% down but is turned away as he has yet to build up the 2-3 year accounts which take more than 2-3 years as your first accounts are done for more than a year after you start trading.

In which world do you think a bank offering him a 50% LTV mortgage on a self cert mortgage that just allows him to tick a box saying 'I can service this debt' would be risky or wrong?

Instead of being an owner paying a mortgage interest of some £150 per month he is now a renter paying £650 a month. Even if he can sort himself out over the next 3 years on the accounts side for him and his family that is a very significant £20k loss in paying more rent than mortgage interest all thanks to the over-reactionists we are saving the world from itself...


20% down self cert needs a return. Not the fake payslip type the type you just tick a box saying im an adult I can make the payments and if I cant you have my 20%