It's a funny old world - BTL's are prospering!

subjecttocontract

Rising rents ( increased yields) are inevitable in the current climate and are basic economics.

As prices stall and some areas see a small fall then the rental demand increases. When the demand increases and there is limited supply then rents will rise........and continue to rise as demand continues to increase.

carolt

...until people who were priced out become able to buy again, and people who can't sell incl some now stuck in negative equity, become forced to rent out their properties/rooms. So rental supply increases, potential renters decrease, prices FALL.....

barnaby-bear

carolt wrote: »

...until people who were priced out become able to buy again, and people who can't sell incl some now stuck in negative equity, become forced to rent out their properties/rooms. So rental supply increases, potential renters decrease, prices FALL.....

But when those priced out can buy again so can the BTLers and the babyboomers, and significant falls also tend to come with credit lending tightening and a downturn in the economy that hits the priced out, and credit tightening hits FTBers as does rockiness in the rental market. Fundamentally in my area the limiting factor is a huge excess in people to accommodation with huge numbers of people moved to the area nad no additional housing. I think fundamentally the mindset has changed and people now see housing as an investment and because everyone else wants it they want a piece too - people aspire to be BTLers even if the yields make no sense, people subsidise depreciation on a shiney new car to the tune of several hundred pounds a month and seem willing to do the same to houses.

I think we'll see housing become more affordable by general stagflation with patches of big falls (city centre new build flats in places with no young professionals) but those 3 or 4 bed family homes now make up an even smaller % of the market and their the type of thing that'll be fought over as it's what most real people want and where the shortage is.

carolt

I think it remains to be seen how permanent the change in 'mindset' really is. In the 80's, everyone wanted to buy property, as a one-way bet. If enough 'investors' get their hands badly enough burnt in the falls, they won't want to 'reinvest' anytime soon. Plus if they end up credit blacklisted/bankrupt this time round, as a result of losses on their 'investments', they won't be back in the market any time soon; at least long after FTB's with blameless credit histories and hopefully some deposits, have been able to make their move. If, as I suspect, the real falls come as a result of amateur BTLetters bailing out, banks may well be more wary of lending to them next time round.

Fundamentally, rents can't really rise much higher than wages IMO. Whilst people are, and certainly have been, prepared to borrow far more than they should to buy a property, (and banks have been prepared to lend to them to do so, at very easy rates), this is because buying a house is seen as an investment, offering long term security.

No-one in their right mind, however, would be prepared to borrow far more than they earn just to rent somewhere, as that really would be financial suicide; nor would banks be prepared to lend to them to do this. Demand would self-limit; if prices got to high, demand would fall away, thus meaning potential landlords would have to negotiate to get a tenant in at all. You can see it happening now with idiot BTLetters who bought at the peak of the market and now are watching house prices fall, whilst no-one is prepared to pay the ridiculous rents they're asking either, in the hope of covering the mortgage. They can ask what they like; but despite the fabled lack of supply, round where I am, houses like this have been on the market for months.

Meanwhile, reasonably priced rental properties are flying off the shelves, business as usual.

subjecttocontract

carolt wrote: »

Fundamentally, rents can't really rise much higher than wages IMO.

Under normal circumstances rents generally tend to rise in line with inflation and not in line with property price increases.....there are a few exceptions of course.

To underline this, one of my flats bought 9 years ago was let at £400 per month. Now its £525 per month and this equates to about 3% year on year.

Wage rises & property prices have risen much faster than that.

carolt

But surely Gordon would have us all believe inflation has been well under 3% for the past 9 years.....?!

Generali

subjecttocontract wrote: »

Under normal circumstances rents generally tend to rise in line with inflation and not in line with property price increases.....there are a few exceptions of course.

To underline this, one of my flats bought 9 years ago was let at £400 per month. Now its £525 per month and this equates to about 3% year on year.

Wage rises & property prices have risen much faster than that.

TBH I've yet to see a decent explaination as to why house prices should rise by more than inflation. I know that house prices in this country have risen by more than inflation for many years now (on average) but that's not the case in most countries that I know of - France and the USA for example - and I think that for the period of the rise in prices, the proportion of people owning their own homes (albeit with a mortgage in many cases) has risen too.

Guy_Montag

Generali wrote: »

TBH I've yet to see a decent explaination as to why house prices should rise by more than inflation. I know that house prices in this country have risen by more than inflation for many years now (on average) but that's not the case in most countries that I know of - France and the USA for example - and I think that for the period of the rise in prices, the proportion of people owning their own homes (albeit with a mortgage in many cases) has risen too.

C'mon Gen, surely you realise it's due to the corrupt, stalinist planning system we have in this country.

Actually I think part of the problem is you are not comparing like with like:
1950s Outside toilet, tin bath in front of open fire, rugs
1970s Bathroom, gas fires & electric water heater, carpets
1990s Double glazing, GCH, downstairs toilet, extension, wall to wall carpets
2000s En-suite, laminate flooring, paper-thin, magnolia walls, double garage

Generali

Guy_Montag wrote: »

C'mon Gen, surely you realise it's due to the corrupt, stalinist planning system we have in this country.

Actually I think part of the problem is you are not comparing like with like:
1950s Outside toilet, tin bath in front of open fire, rugs
1970s Bathroom, gas fires & electric water heater, carpets
1990s Double glazing, GCH, downstairs toilet, extension, wall to wall carpets
2000s En-suite, laminate flooring, paper-thin, magnolia walls, double garage

Good point. Have you ever seen labourers collecting wild magnolia flowers to make magnolia paint? It's a magnificent sight. It must cost a fortune to hand pick all those flowers and it's terribly dangerous of course.

BobProperty

Generali wrote: »

Good point. Have you ever seen labourers collecting wild magnolia flowers to make magnolia paint? It's a magnificent sight. It must cost a fortune to hand pick all those flowers and it's terribly dangerous of course.

Good job we can get Eastern Europeans to do it at minimum wage then, otherwise the price would be even higher.