Tuesday, Sep 11, 2007
.....and then the rents start to boom, rather inevitable consequence of booming house prices, rents start to rocket.
BBC: Buy-to-let rental boom continues
The buy-to-let property market is still booming, despite higher interest rates, according to the Royal Institution of Chartered Surveyors (RICS).
Posted by david20040_0 @ 05:59 PM (1036 views) Add Comment
35 Comments
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1. david20040_0 said...
After all the booms in house prices it was inevitable that rents would start to rise as people who cannot afford their own home are forced into renting.
I predict a massive increase in rents and a boom in profits for buy to letters.
2. Surfgatinho said...
Yawn!
1.Rent is part of CPI for starters. Can't be bothered to explain what that might mean
2.This is from a VI
3.How does it work when people can't afford the rent?
3. Crashing Pumpkins said...
David should apply for position of prime minister since he's certainly qualified. He's a mindless, uneducated fool.. in fact maybe over qualified.. he does make me laugh though..
4. Happy Renter said...
Rents are flat around here in 'the best city to live in the UK' - just as flat as the 'for sale' market and more asking price reductions this week
I predict overstretched BTLs loosing their own homes as well as those they have rented out
Make a loss on your BTL and you can't hand in the keys and walk away without any impact on your own house.
5. enuii said...
Alas Dave this is only a temporary phenomenon ave, if you care to read the article:-
"Current economic uncertainty has created an ideal platform for buy-to-let investors to cash in on rising rental levels," said RICS spokesperson Jeremy Leaf. "Many would-be buyers have decided to wait and see how the interest rate cycle will affect the market," he added.
So this is a temporary situation that will not last hence the phrase 'current economic uncertainty' and once things become certain both you and the landlords association will go very very quiet on the subject.
6. david20040_0 said...
Not really, this isn't short term.
Rents are now starting to boom to catch up rising house prices.
7. uncle chris said...
There is a natural ceiling to the rents that landlords can get, and that is set by the average wages in the area. Just ask anyone if they would choose to rent at a level whereby they would move further into debt and they would understandably say 'not on your nelly'. After all, what is the point of working your guts out in a job where the only outcome is to go further into the red. Renters will appreciate this a darn site faster than buyers, and be able to act on it much quicker.
No doubt RICS would have us believe differently, but rents are far more limited than buying houses on easy credit.
8. Quiet Guy said...
I think David's comment is a bit too sweeping. Surely it all depends upon local market conditions and how long ago the BTLer bought the property.
A BTLer who bought five years ago in a nice area with good infrastructure, jobs and amenities should do well but making the numbers on a recently purchased off-plan flat in a less pleasant area is probably impossible now.
9. david20040_0 said...
Just like there was a natural ceiling to house prices?
And where has that led us exactly?
House prices have boomed, potential FTB can't buy, so they rent instead, watch rents rocket.
Renting has been far too cheap in this climate of booming prices.
10. Surfgatinho said...
David, why don't you try the main forum so your primary school grasp of economic reality could be thoroughly mauled?!
11. bingo said...
Dave, remember the driving season in the States? the reason you said oil had peaked at $72 per barrel; 6 WEEKS AGO.!!!!!! you make so many idiotic, ill thought out, mind numbingly banal predictions that, even though I decided weeks ago never to respond to any more of your nonsense I find myself unable to control it any longer....
12. crash bandicoot said...
David,
I think that high house prices have been driven upwars as a pseudo investment (you have to live somewhere so why not make money on it). I am afraid that the same justification does not hold true for rents.
As for the natural ceiling it used to be 3x salary for 25 years, but once that went out the window all hell let loose. Expect a return to old-fashioned values soon.
13. Ash4781 said...
I thought they were relying on capital gain!
14. david20040_0 said...
OPEC has just announced that they will increase output, therefore oil will drop.
Oil will drop soon it always does as approach Christmas.
Sidetracking though as rents are now starting to boom.
15. captain sensible said...
If prices are still rising (I remain to be convinced) it is good news that BTL investors are pushing them up rather than FTBs. Owner occupiers will fight all the way to keep their home, watch how quicky BTL investors scurry for the exit (whatever they might say in surveys) when significant falls begin to be reported. As for rents rising, there seems to be increasing hostility in the comment sections of the Times, Guardian, Mail etc towards BTL investors and second home owners from those currently priced out of the market. Eventually one or other of the major political parties will spot that there are votes to be gained by taking the side of tenants and would-be-buyers. Various solutions may be offered - rent control, greater security of tenure, the easing back of tax incentives for BTLrs etc. Any one of these will lead to a rush for the exit - enough in itself to precipitate a crash.
16. Littledeb said...
Can someone please put this guy out of OUR misery!?!?!
17. uncle chris said...
David ..... case in point ..... the 3-bed 3-reception detached rural cottage we moved into 2 weeks ago. The landlady quite openly told us that she rented it to a family for £675 in the middle of last year. 8 months later they did a midnight flit leaving her with a £1200 clean-up bill. We are renting for £595 because she says "she would rather have steady tenants that can afford to rent it rather than have the same happen again". Please tell me how that is booming rents David?
Incidentally, similar properties in this area would be in EA windows for £300,000 ish, which translates to an A&L fixed-rate INTEREST ONLY mortgage of £1450 rising to £1950 after 2 years. You are right in the fact that rents bare no relation to prices, but you are living in cloud-cuckoo-land if you think that landlords can pass on their increased costs to tenants. The £1900 I mention would require a £32,000 wage before any living expenses were taken away. £60,000 may do it, but the average wage in this area is closer to £16,000.
18. david20040_0 said...
Eh? Of course there is going to be hostilitym BTL saw potential in property and have made vast amounts of money.
No major political party is going to stop BTLers investing in property becuase that smacks of Communism and practices used in the Soviet Union.
It is very simple, house prices have boomed moving the average FTB age up to 34.
Most people 25+ do not want to live with their parents anymore and decide to buy a house, if they can't buy a house then they rent.
With more FTB priced out then there is greater demand for rental prices thereby pushing up rents.
Rents in the Midlands are going up significantly.
Rents are far behind house price rises and are now going to experience a boom.
Despite all of the recent interest rates property is still booming and now even appears to be picking up pace. There isn't going to be a crash.
Saying that any party would stop people investing in property is rather odd and will not happen, that is just wishful thinking.
19. dohousescrashinthewoods said...
David, this may be borne out into the new year, but something nagging tells me it will go the other way. I can't put my finger on it, but it's along the lines of housing starting to tank sharply and BTLs getting panicky, driving down rents in a desperate bid to pull in tennants. (hence I am planning to move to another rented place in the new year)
Those savvy enough to STR are probably waking up and getting out just in time, providing the current blip (this is a BBC story after all). The rest will stay home, oblivious, waiting for the next exciting installment of the BBC "news" on their massive chav-tellies. I can see BTLs blithely pushing up rents, suddenly finding that no one is taking, and discovering themselves to be in thin air above a downward curve.
I may be in my own sweet wonderland, but I can see rents starting to fall and people starting to incredulously ask what happened as we head for Christmas/new year, wondering if they were lied to by those "professional" BTL websites. I guess time will tell.
20. david20040_0 said...
Maybe in the United States but not here.
It has just got so ridiculous here that a crash becomes less and less likely as politicians and the central banks keep doing everything to keep the good times rolling.
21. Rep013 said...
David, normally I read what you have written, laugh and move on.
Unfortunately, I must now respond.
We will look at OIL ...
Yes, OPEC have agreed to raise oil by 500,000 bpd from November. Can you answer the following?
What will be the new target?
What is the existing target?
What did they provide last month?
How much was this over the existing target?
How much was this over the new target?
Why is this important?
I will then know you have some knowledge of the subject and might take you more seriously with regards to your other posts.
22. dohousescrashinthewoods said...
Quite the opposite, David. I sympathise with your reluctant bull position, but consider this:
"It has just got so ridiculous here" - exactly, the up is worse than the US, the down will be worse too.
"politicians and the central banks keep doing everything to keep the good times rolling" - quite, but as analysis of the numbers has shown, the billions that went in are like peeing on a forrest-fire in comparison to the trillions coming down on our heads.
There is no more money. No one can print enough to save us - and even if they could, it makes it worse, not better, because that is exactly what got us here in the first place. Debt does not fix debt. At some point you have to pay up or go bankrupt and it looks firmly like everyone's out of cash.
23. bidin'matime said...
David, a buyer might be prepared to overstretch themselves in the belief that they are 'investing', but a renter wont pay to pay more than the real value of the place as a home. Also, buyers only look at the cost of raising the finance between the equity they have and the purchase price - they compare that to the cost of renting, which, of course, completely overlooks the interest they could get on their equity (the 'opportunity cost'). Add to this the fact that would-be sub-prime borrowers make up a significant proportion of the renting population and you have a generally greater price sensitivity for renting than for buying.
And, like Uncle Chris, we rent for a fraction of the cost of buying (the rental yield on our new place is around 2.5%, like UC’s – enough to bring tears to the eyes of the average BTLer and send them scurrying to the bathroom with IBS…). Sure, if the landlord had bought the place last year, they’d be looking for twice the rent or more, (although they would never get it), but having owned it since 1985, they think that what they get is a really good return, considering their investment has done so well into the bargain. The fact is that landlords with smaller mortgages (or none, as in this case) will always keep rents lower than new BTLers can stomach, undermining their efforts to push rents up and ultimately putting them out of business.
24. Scott said...
David, there is a phrase in the investment world; trees do not grow to the sky.
25. uncle chris said...
Let me get this right David - you think that because house prices are more ridiculous here than in the USA, we are less likely to experience a similar crash to the one that is in full swing over the pond .... you know, the one the experts said a year ago could not happen - interesting reasoning. I really don't know how to respond to your logic. Perhaps with the same resignation that I did with the teenager in our local shop yesterday who said I couldn't get 18 stamps because they only had books of 12 and 6!!!!
By the way, you totally ignored my point that the cost of the place we are renting is £80 (11%) less than a year ago? Care to respond to that?
26. japanese uncle said...
Massive recession/depression with major disruption in the financial sector, means unemployment spillovers in nearly all sectors. People will no longer be able to afford to rent the whole flat on their own but live in bed-sits, thereby overall demand for rental flats will decline. Very likely scenario.
27. david20040_0 said...
Yeah, i'll reply to that unclechris that is an isolated incident after your landlord had a crap time with the previous tenants.
28. crash bandicoot said...
If you are a priced out FTB and rents rise too far, you will become a priced out renter too. There is no element of choice in it, if you can't afford the rent then you can't live in the house. There is no hiding behind self-cert or silly multiples with renting.
And obviously rents will never rise enough to cover the new BTL'ers mortgage, because once the rent is that high the FTB can afford to buy a house themselves!
29. Sold Out said...
I recently renewed my rental agreement with the landlord.He wrote to me and reminded me that the lease was up and made a point of also stating that he was considering raising the rent.I replied that i wanted to continue the lease but wanted to know what the increase would be because i had other places to view.Two days later he informed me that the rent would be increased by £10 a month,an increase of 1.3% for the next 12months.oh yes David rents are really booming.
Any comments David? or am i just another "isolated incident" in your dreamt up rental boom.
30. Yes said...
God I hate to say this but I am looking for a house to rent, live in Cornwall, and they do seem to have gone up and also seem to be LET quickly too, I cant see any reduction in rent at all.
31. enuii said...
Dave, you summed it up beautifully in your last post:-
' It has just got so ridiculous here that a crash becomes less and less likely as politicians and the central banks keep doing everything to keep the good times rolling.'
You're exactly right about RIDICULOUS because that is exactly why a crash & recession will happen, politicians cannot prop up a market when it goes pear shaped just like the Major Government (can you remember it) failed to stop Black Wednesday.
32. Wotser said...
There may be some BTLers entering the market now, but the smart ones are quietly reducing their exposure. A guy i know in North London has already sold 2 of his and is selling a further 7 now, reducing his portfolio by 50%. Also i have already seen softening prices, although its early days yet, and this one has a long way to go!
33. Einstein said...
David -
You always manage to stir up this site... goodness knows how... I saw this article - but do not understand your logic or rationale. What do you think these people who ''cannot afford' or are "decided against buying" are doing in the meantime? I put it to you that they are already renting,...
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35. Van Hoogstraten said...
What a ridiculous article & silly argument, the days of easy credit sustaining risky BTL investments in a housing market that is teetering have gone.
How can RICS and for that matter anyone else be unaware of the credit crunch which has resulted from bad lending – are they deaf & blind or just choosing to ignore it.