Monday, Apr 21, 2008
The risk of negative equity means now is a good time to rent
Guardian: Is now a good time to rent?
Morgan Stanley reckons that 1.2 million families could be plunged into negative equity in the next two years as house prices fall by as much as 25%. If you're in Glasgow, Manchester, south-east London or Birmingham, you're more likely to be among the 75,000 households Experian predict will go into negative equity this year. The Abbey suggests that if house prices are about to fall, while interest rates remain high against inflation, it might be financially astute to rent short term. Meanwhile, rents are soaring, according to Paragon Mortgages' BTL index for March. Great for landlords (average rental income in February rose 5.2% over the past quarter), but glum for new tenants (rents went up 15% over the year and the trend is upwards). Uhm rents up 5.2% but IR up a lot more!!
10 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. it_is_going_with_a_bang said...
I just don't believe the "average rent rose by 5.2%"
I just renewed for a year - at the same price as last year.
25 Year from saving from buying. The vast majority of people don't stay in the same house for 25 years. So that would present somewhat of a problem if you go the sell your house and its in negative equity.
"f house prices are falling, surely now is the time to snap up a bargain? "Heavens no," says one north London estate agent. "House prices will continue to fall, so you should wait."
Somewhat closer to the truth.
2. letthemfall said...
Instead of owning a house you would have more money in the bank, if things stay as they are. This argument only holds water if the house is worth more than the cash after 25 years. And the best way to ensure that is to buy when prices are low, unlike now.
3. C'mon Correction said...
My rent is the same as it was five years ago. In fact, against inflation my rent is getting cheaper year-in-year-out.
4. mark wadsworth said...
"Is now a good time to rent?", er..., let me think, Oh God, tricky one, er ...hmm.
5. Littledeb said...
I've been renting the same place for almost 5 years and the rent has not increased one penny in that time. It has always been cheaper than buying the same house and having say a 75% mortgage on it (if bought when we started renting it). In that 5 years, we've managed to squirrel away a fairly vast sum of money which would have simply gone to paying off a mortgage for a house which will soon be worth less than it was back when we started renting it. S'not rocket science is it.
6. magnifico said...
IGWAB, your rent hasn't gone up because I suppose you're a good lodger who pays on time and in full.
I've been keeping my eyes on the Surrey/ Middx renting market,as I put my house up for sale with a view to rent for a while,a dn I can honestly say rents have gone up considerably in the last two months.
7. Sneaker said...
It's utter nonsense to say that rents are soaring for buy-to-let landlords.
BTL landlords are having to CUT rents in order to get tenants. Thing is, the PRICE of BTL properties is falling faster than than rents.
e.g. a BTL property drops from £260k to £140k (as river-front flats have done in Ipswich) and the rent drops from £1000 to £900 a month. £1000 pcm versus £260k is 4.6%. £900 pcm versus £140k is 7.7%.
Thus the yield goes up in % terms, but the actual cash amount of rent received has dropped 10%. It takes a moron to report this as a soaring rent!!!
It's only good news if you buy a BTL property AFTER it has fallen. And as far as I'm aware, not many people want to do that.
8. Jayk said...
Rents are going up in my area. I live in an "executive apartment" (small, flimsy, noisy, balsa wood newbuild, naturally) in Fleet and am looking for a house in Fleet or Farnborough as the wife is expecting. A year ago an average three bed house would have cost me 825-850pcm. Now it's at least 1,000pcm for the same type of property in the same area. And they are not staying on the books for long I can tell you.
While BTL mortgages may be suffering, I am certain rental yields are doing perfectly fine. Indeed, when I signed a new six month lease on the flat in January, my rent went up from 735pcm to 800pcm. I wasn't best pleased but couldn't find another place of similar quality and position for less.
Friends in Guildford and various Berkshire towns report the same sort of thing.
9. Jayk said...
What utter rubbish Sneaker. Complete and utter rubbish - the sort of thing based entirely on opinion and not backed up with evidence which makes people resent this site and many of its contributors.
Rents are only dropping in some areas such as Leeds and Manchester. Elsewhere there is substantial evidence they are rising. Now, if in March a flat which is valued at 200k attracts a 750pcm rent, and in April it is valued at 190k and attracts a rent of 750pcm IT STILL ATTRACTS A RENT OF 750pcm! So what if the value of the property is less, unless you NEED to sell you are still getting your rent!? What DOES matter (and what you ignore) is how much the MORTGAGE is and whether the rent covers the monthly repayments! Get it? And rents are going up in many if not most areas to cover increased costs of mortgages.
Some people............spend a little less time forcing your opinions down our throats and a bit more time adding some evidence or data from the real world - anecdotal or not. Read my post: in my area, rents are up 20% in just a year. Have mortgages gone up by a fifth in the same period? Not my opinion but what I have FOUND in the marketplace.
Do you really think there are people out there who own properties on which the rent covers the mortgage but they are selling because the potential sale value on an asset they don't actually need to sell is down? "I don't need to sell, but if I did need to sell I would get less therefore I am selling even though I don't need to sell".
10. Utterlee said...
I'm in London and moved house 2 months ago. Whilst I was looking an estate agent mentioned rents had gone by around 10% in the last couple of months due to the collapse of the sales market. Obviously some people here have been lucky not having a rent rise in 5 years, but I've found my rent has gone up every year even when I haven't moved house. Currently my rent alone costs me 40% of my take home salary (which is around the national average), and I only live in a very humble two-bed victorian conversion in Stockwell, sharing with one other person.
Still, buying the equivalent would be even more expensive.