Why the bad news for landlords is just beginning

Electrum

In February, the average national monthly rent in the UK fell by 0.6% year-on-year, to £921.

In reality, rents went up in most places (particularly Wales – up 5.3%) but fell hard in London and fell a bit in the Southeast. In London, rents were down by 4.3% to an average £1,246 a month. And in the southeast of England, rents fell by 2.6%.

So what’s going on? Believe it or not, it’s down to supply and demand.

Since 1 April last year, anyone buying a second home has had to pay an extra 3% in stamp duty. Naturally, all of the people who had been idly considering buying themselves a little piece of investment property heaven rushed to get their deals done before then.

As a result, says Countrywide, the number of properties to let has grown significantly in recent months. Last month, there were 10% more properties available to let across the UK than in February 2016. The figure for London was 18%.

At the same time, the number of tenants looking for properties hasn’t budged by much. In fact, in London it’s fallen by about 3%.

So demand is stable or weakening. And the number of properties around has gone up. As we all know, if supply goes up, and demand stays the same, then you get falling prices.

So is this likely to continue? Have we reached a turning point? I suspect that we might have – for renters, at least.

http://moneyweek.com/property-market-rents-falling-bad-news-for-landlords-is-just-beginning/

westernpromise

If my BTL rent were to fall by 5% when I renew, it will be an utter financial disaster for me. It will cost me 0.3% of my gross income.

Belts will have to be tightened - so when I redecorate it, it'll be Dulux next time rather than Farrow and Ball.

Brutal.

edinburgher

You're doing this landlording thing all wrong - you're meant to paint the walls with poison and tears - not paint!

westernpromise

What walls?

martinsurrey

Electrum wrote: »

At the same time, the number of tenants looking for properties hasn’t budged by much. In fact, in London it’s fallen by about 3%.

So demand is stable or weakening. And the number of properties around has gone up. As we all know, if supply goes up, and demand stays the same, then you get falling prices.

So is this likely to continue? Have we reached a turning point? I suspect that we might have – for renters, at least.

So you say that supply was increased in the short term by an impending long term hit.

you then claim that we have reached a tipping point?

you contradict your self.

going forward in the mid term, the 3% Stamp increase will reduce supply of new rentals, and as you say, supply down and demand flat = increased prices for renters.

AG47

martinsurrey wrote: »

So you say that supply was increased in the short term by an impending long term hit.

you then claim that we have reached a tipping point?

you contradict your self.

going forward in the mid term, the 3% Stamp increase will reduce supply of new rentals, and as you say, supply down and demand flat = increased prices for renters.

Not surprising all the perma prop bulls jump on the offensive :rotfl:

*~Zephyr~*

I'm OK. I'm in Wales :rotfl:

GreatApe

There was definitely a surge in supply around april-may last year which reduced rents some 10% in my area of Zone 2 London. However this will have been temporary and the additional taxes should have seen fewer BTL purchases for many months now which should have meant the rents recovered however they haven't

My own guess is that the EU tenants are beginning to go home and fewer are arriving, I've had two EU tenant leave already to go back home. Of course my data sample is far too small to draw any conclusions especially as many EU citizens were temporary before the brexit vote as evidence by the high migration in and out of the UK

If EU citizens stop coming to the UK, I believe as much as half the ones here will leave too. This could be a very big drag on rents and prices for quite some time.

Assuming net EU migration in was 300,000 a year and this falls to 30,000 a year
Assuming net EU migration out was 150,000 a year and this does not fall much to begin with
We would go from +150,000 net EU migrants a year towards -120,000 a year. A very significant shift that would see population growth go from about +500,000 annually towards +200,000 annually with the change even greater in London and the SE as they have a higher proportion of EU migrants.

AG47

K4yl5 wrote: »

Haha!!! My landlord just increased my rent by 8.6% to bring it up to "market value"...

Do you live in Wales? This is the only place going up, London and the South East are falling like a rock.

An equalising is taking place. The smart money is selling up in overvalued London and buying undervalued areas.

Its simple supply and demand. The number of properties to let has grown significantly in recent months. Last month, there were 10% more properties available to let across the UK than in February 2016. The figure for London was 18%.

At the same time, the number of tenants looking for properties hasn’t budged by much. In fact, in London it’s fallen by about 3%.

So demand is weakening as people move away from London and the largest property building boom in living memory is adding even more new properties to the supply. And the number of available properties already around has gone up. As we all know, if supply goes up, and demand falls, then you get falling prices.

So is this likely to continue? Have we reached a turning point? I suspect that we might have – for renters, at least.

I don’t see this oversupply of property vanishing particularly quickly. There are still too many extra blocks of luxury flats being built on every little corner of London that they can. Also, I suspect that we might see a rise in the number of distressed landlords before too long.

Windofchange

Anecdotally a couple of flats on my road have sat empty for a good few months now. The one I am looking at opposite me as I type this was on the market for £2600 pcm, then £2500 pcm, then £2250 pcm. It has just been moved into last weekend and I would imagine the new tenants made an offer too so unlikely it went for £2250. Not sure what it was rented at previously, but I should imagine the landlord thought hey how about a cheeky increase. didn't work hey.

Large amount of empty rental properties, or ones that are no longer profitable after section 24 comes in over the next few years could start to turn into sales. Lot's of ex BTL turns up on the market in one go and it will put a downward pressure on prices. When factored in with what else is happening in the economy with Brexit and prime London crashing to mention two others and it could pick up pace very quickly.

You can argue about sentiment in the wider market, but BTL is entirely sentiment driven - people aren't buying up houses out of the kindness of their heart. If your second home is no longer appreciating in capital value and is also costing you each month then how long are you going to hold onto it for? Interesting times ahead.

Private_Church

westernpromise wrote: »

If my BTL rent were to fall by 5% when I renew, it will be an utter financial disaster for me. It will cost me 0.3% of my gross income.

Belts will have to be tightened - so when I redecorate it, it'll be Dulux next time rather than Farrow and Ball.

Brutal.

Then I hope you make better choices as a landlord than you do when choosing paint brands. The vast majority of decorators don't like F&B paint because its overpriced tat and you're being taken in by the marketing.

No logic in buying overpriced branded paint when you can't have perfectly decent paint colour matched. Any company that feels the need to give its paint colours stupid names such as "Elephants breath" and "Monkeys back" should be first in the bin.:D