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It's a funny old world - BTL's are prospering!
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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.
Consider this though: Would you say that fundamentally food and fuel can't rise faster than wages too?
Rents can go up because people will cut spending on other stuff if they have to. Having a roof over your head isn't optional so discretionary spending will be hit.
Of course it doesn't help that food and energy prices are also rising at the same time - so if I were in the retail business right now I'd be extremely worried. Oh, and credit is getting harder (and more expensive) to obtain too. Not good.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
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.
The prices rose by far above the inflation rate because the banks suddenly started giving out great wodges of cash to anyone drawing breath who wanted to buy a house. Not only would they give out lots of money, they weren't too particular about who they loaned it to either. Deposit? Who needs that in our eternally booming house market! Want to borrow 125% of the house's value? No problem sir!
Then add in the factor of speculators jumping on the bandwagon and a media telling everyone that home ownership and property investment was the way to go (all those TV 'property !!!!!!' shows) and it's easy to explain the last six or seven years of house price madness.
The only question is how bad and how long the downturn is going to be.--
Every pound less borrowed (to buy a house) is more than two pounds less to repay and more than three pounds less to earn, over the course of a typical mortgage.0 -
to understand why yield is measured this way, you have to have a basic understanding of opportunity cost.
Yield is income/current value because you can conver the current value into another commodity.
So if you make £2,500 per year from a house your aunt gave you you might regard that as infinite yield. However, if the house is worth £100,000 then it's 2.5% yield because you could put that £100,000 into a bank account and make 5% on it. That's twice as much yield (and it's still infinite yield based on the original price).Happy chappy0 -
Consider this though: Would you say that fundamentally food and fuel can't rise faster than wages too?
Rents can go up because people will cut spending on other stuff if they have to. Having a roof over your head isn't optional so discretionary spending will be hit.
Of course it doesn't help that food and energy prices are also rising at the same time - so if I were in the retail business right now I'd be extremely worried. Oh, and credit is getting harder (and more expensive) to obtain too. Not good.
Again it's not like for like though, in my area 5 years ago a couple/family would rent a 2-3 bedroom place, then it became a 1 bed place or two couples in a 2 bed flat/house now people with kids live in 1 bed flats and couples in a single room in a shared house at £500 for room in a house without a lounge (and this isn't london)... so although the individuals aren't paying more in rent the rent for the same accommodation has gone up because there's a shortage....0 -
Where the hell do you live, barnaby-bear, where it costs £500/month for a room, that's not in London?
Why don't they all move somewhere cheaper...???0 -
Rents can go up because people will cut spending on other stuff if they have to. Having a roof over your head isn't optional so discretionary spending will be hit.
Having a roof over your head is essential, yes. But that doesn't mean that rents are fixed.
People can decide to move in with their parents, share with friends, or go from a 3 bed with 2 kids to a 2 bed, with the children sharing. Also if times are tight, more people may well take in lodgers, increasing the number of "bed spaces" available to rent.
For example, I've got some mates who are a couple with no children, and rent a 3 bed (2 double, one single) place because they like the room. But they could easily downsize to a 2 bed or 1 bed, if rents went up too much for their liking....much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
Where the hell do you live, barnaby-bear, where it costs £500/month for a room, that's not in London?
Why don't they all move somewhere cheaper...???
Because people generally want to work and have jobs and not live off the state and people have family they want to live near - usual reasons.
And people hope things will get better and because it's normal here, it's what people perceive as the standard of living nad perhaps by working here for a while they could afford a home and lower salary somewhere else in the future... I don't think people in a lot of the country realise how bad HPI can get and say oooh but prices can't go higher relative to wages etc... 0 -
barnaby-bear wrote: »couples in a single room in a shared house at £500 for room in a house without a lounge (and this isn't london)... so although the individuals aren't paying more in rent the rent for the same accommodation has gone up because there's a shortage....
Where on earth do you live?!
In central London, you can get a flatshare in WC1 (very nice area, near Covent Garden, Oxford Street, and the City) for less than £500 a month, including a living room....much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.0 -
Where the hell do you live, barnaby-bear, where it costs £500/month for a room, that's not in London?
Why don't they all move somewhere cheaper...???
I'll vouch for Barnaby's statement if he doesn't want to give out too many details. What I don't understand is why people stand for it & don't live elsewhere. You could take a serious pay cut & yet still have more disposable income each month."Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
"I think I'll become an alcoholic," said Betty.0 -
neverdespairgirl wrote: »Where on earth do you live?!
In central London, you can get a flatshare in WC1 (very nice area, near Covent Garden, Oxford Street, and the City) for less than £500 a month, including a living room.
Cambridge
That's a couple in a double room, for a single you'd be looking at more like £350. Occassionally you'll still get a studio at the £600 mark but htey seem sought after by people with babies0
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