Monday, Dec 17, 2007
There are i@iots, prize i@diots, David Smith, and there is Judith Heywood -- the cheerleader in chief
Times: Rental market buoyant as sales stagnate... no! it is moderating... no! flats are empty... eemmm errrr...
When Judith does not know what to say she barks some B/S and the Times promptly publishes. This article says absolutely nothing, and its opposite. "The rental market typically flourishes in a downturn. But, after a buoyant second quarter in which many investors began to make up for several years of subdued rental growth, buy-to-let owners will be disappointed to learn that the boom in demand and rents charged is already moderating." This will remain as one of the best quotes signalling the start of the BTL crash. Thank you Judith you are memorable i@iot.
Posted by confused76 @ 09:59 PM (231 views) Add Comment
2 Comments
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1. Howzat said...
Yes, you're right, Judith is a numb skull; but why? Could it be because she, like money managers, stock brokers et al say the things that will propel their sales or income. In the case of Judith, I suspect she has at least one rental property and thus wants to prop-up her prospect of continuing income. The fact is that the majority of property for rent derives from owners who have used primary-residence equity to buy. If there is a severe fall in house value, what was sufficient equity will become negative and, with the credit crisis, there is the strong likelihood lending institutions will forclose forcing a fire-sale of rental property. There might be, therefore, a crash in this sector the likes of which the UK has not seen before. The same scenario could happen to multi-home owners, obviously.
Regards all, and Merry Chrsitmas
2. George Sore Ass said...
Actually I think it quite likely that rents will increase as house prices crash. If you look at what happened during the past 5 years, house prices grew at 10-15% or whatever per year but rent increases were very small, and even negative in real terms. I checked rental prices recently and the same type of 1 bed flat i rented (in same block) is the same rent now as it was in 2001 when i moved in, and 2003 when I moved out.
It makes sense when you think about it - property bubble = more BTLs = more rental property = lower rents. It is all supply and demand.
It also makes sense that rising rents would be a sure sign that house prices are reversing and that BTLs are bailing out and more and more potential buyers are looking to rent instead of buy.
So in the same way that falling rents have characterised the house price boom, it seems logical to me that rents will rise to some extent as house prices crash. However I think the rises will be subdued since the property bubble has resulted in frantic building over the past few years, so total supply vs demand is almost certainly greater now than at the start of the bubble.
All in all a hp crash is good for those renting who want to buy in 2-3 years time when prices are significantly lower. Sure you might face 5-10% rent increases for a couple of years, but think of the 30-40% of the price of a house you'll save and it's all good news really.