Crystal ball gazing

macaque_2

Some property investors believe that the housing market will go full circle. I do not agree with this.

At one time, a rare tulip bulb could be sold for the price of a detached house. More recently, dot com stocks were selling at unrealisitc prices. It does not take a genius to work out that tulip bulbs and dot com stocks will never revisit those dizzy heights. Their dramatic fall from grace wiped out many investors and serves as a permenant warning for speculators.

Without the recent mad scramble from BTLs, one suspects that house prices would have corrected themselves 5 years ago. Delayed market corrections tend to be more severe when they do arrive. It seems inevitable that the millenium property bubble will acquire some measure of notoriety as repossessions mount. This will have a permenant pyschological impact on both investors and lenders.

People still make good money from tulip bulbs and dot com stocks. However, they have to rely on disciplined business methods to make a profit. They can no longer buy any old rubbish and sell to a bigger fool for a fat profit. I suspect we are seeing the beginings of a similar revolution in the property rental business. For the first time in 100 years, renters have the upper hand. As a result, the quality of rental accomodation is being driven up and rents are static or falling (in relation to income).

It seems inevitable that renting will become another target for big business. Within 5 years I believe we will have companies like 'Travel Lodge' in the rental market. These new players will have large chains of properties rented out at competetive prices. They will commission their own buildings and have their own maintenance companies to benefit from economies of scale.

fc123

OMG I think you have hit on something..having been an Independent edgy boutique owner for many yrs...the time has come where there isn't enough spend leftover (esp as a new Primark suoerstore has hit town...gobbling up 1.5 million per wk) for us.....we do well...but fixed costs have doubled in past 5 yrs yet T/O is pretty constant.
All the independent landlords on this site take note...the Tesco effect will infiltrate ALL sectors eventually...in the next 2 decades.

they may start their empire with a joblot of flats in Thamesmead.

Macaque, no-one responded?? because no-one thinks that they will end up like the sheep farmer or the town indie baker.

clutton_2

""renters have the upper hand. As a result, the quality of rental accomodation is being driven up and rents are static or falling (in relation to income).""

this is only true in some of the rental market - depending on what sort of tenants you have so depends on the demand.

In inner city new-build 1/2 bed "professional" lets i would absolutely agree - the market is saturated and rents have fallen, leading to some repossessions, and even some developers going bankrupt.

But, in other sectors rents remain healthy.

macaque_2

clutton wrote: »

""renters have the upper hand. As a result, the quality of rental accomodation is being driven up and rents are static or falling (in relation to income).""

this is only true in some of the rental market - depending on what sort of tenants you have so depends on the demand.

In inner city new-build 1/2 bed "professional" lets i would absolutely agree - the market is saturated and rents have fallen, leading to some repossessions, and even some developers going bankrupt.

But, in other sectors rents remain healthy.

I am reflecting on what might happen in the future rather than what the market is like today.

I think renting is something of an elephant in the room when it comes to investment opportunities. Think what advantages big players would have in the rental market:

1. They can borrow more cheaply than an individual
2. They can build houses more cheaply and to a higher spec
3. Their management charges would benefit from economies of scale
4. They can achieve much lower than average voids by offering better value for money and good marketing.
5. They can make money from the tenants in more ways than just rent. They can for example negotiate bulk discounts for home insurance, electricty, gas, telephone, laundry etc.

CYBERCIDERSAVER

The only thing I know for sure is that I am not prepared to risk my finances on a property at current prices. Not really relevant whether they fal or not.

I got hairy balls not crystal ones.

fc123

In the past 2 decades, large companies have taken over certain sectors that were always dominated by independent traders of differing sizes.
"Tescopoly" is worth a read.

For example; restaurants, go to any new mall development and all the eating venues are chains. The independents don't get a look in any longer.

The next year poses a real opportunity for a large company to develop the above idea but with BRANDING....not just a large portfolio of properties.......but a portfolio that has a theme and consistent image...........................
our city has many visitors and there are a great selection of independent, interesting restaurants etc....yet many troop into Pizza Express as they like the comfort of knowing exactly what to expect ............the same would work with rentals.