Tuesday, Sep 23, 2008
Confims what many of us supected ...
Metro: More renting as mortgage woe deepens
"Demand for rented accommodation has soared by two-thirds during the past year and is the strongest 'for decades'. The number of leases taken out during August was 65 per cent higher than in the same month last year... 'If you can't get the finance to buy a house, you're forced to rent.... the strong demand for rented accommodation was not driving up rents, as the demand was being met by supply from sellers who had opted to let their home rather than accept a lower price for it in the current market. Latest figures from the Bank of England showed that the number of mortgages approved dropped by 71 per cent year-on-year during July."
Posted by mark wadsworth @ 10:07 AM (1131 views) Add Comment
11 Comments
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1. harold said...
Think of renting as a life-raft; I'm clinging to the positive equity I made when prices were going up, while the Titanic is going down.
2. techieman said...
"Forced to rent" ...... wonder if this will be couched in these terms going forward. For the moment though seeing "forced to rent" or "are you buying or only renting" type of comments defines the social mood, as things change will renters have some respect bestowed upon them?
3. beartil2010 said...
Pretty soon you can go down to the bankruptcy courts and see people with 'Forced to buy' written all over their faces. In fact you probably can already.
4. theboltonfury said...
you mean forced to sell? good point though
Renting was never forced on me. A calculated and wise lifestyle choice. Reckon it was one of the best ones I ever made for my familly
5. harold said...
Yes Techie, I'm getting grudging respect for renting. I'm careful, however, to avoid the green-eyed monster at this stage, and play-down my decision to rent.
BTW, stock market is doing well this morning.
6. beartil2010 said...
I meant forced to buy as in 'too stupid to realise I had a choice not to buy'... but yes then forced to sell is the other side of the same coin
7. beartil2010 said...
Yes stocks declining again - any more rabbits and hats over there Paulson?
8. stillthinking said...
Rents in London are outrageous for what you actually get, and I am hoping that there is a fall from rising unemployment. But. I was talking to somebody about this who is a long term property renter (inherited a load of houses lucky swine), and he basically said he didn't care if he got a private tenant or not because he could always get a long term deal from a housing association or even take housing benefit. When I suggested that housing benefit would no way match private rent he said "Not really".
I was surprised to find that housing benefit will set the floor at slightly under current prices. I was also worried that the amount you can get for a 5 bedroom house is £2200 in Chertsey. I include for your information this snippet from Harrow council.
"If your rent is lower than Local Housing Allowance you will be able to keep up to £15 of the excess.
For example if the LHA rate for the size of property you need is £200 a week and your rent is £195.00 your benefit will worked out on £200 a week.
You will be able to keep the extra £5 and this will not affect any other social security benefits you get. "
http://www.harrow.gov.uk/site/scripts/documents_info.php?documentID=1155&pageNumber=7
So with rising unemployment, the burden of mortgage repayment currently falling on private renters will move to via the government to the taxpayer. As soon as people give up on selling and move to say renting out on interest only with the tax implications of that, unless they are in an area of oversupply i.e. insufficient tenants existing, they will probably be OK.
From that, I think there is a possibility of a lengthy standoff between sellers and buyers. House prices will fall, but for fewer and fewer transactions. So the process of a housing correction might gum up from the government borrowing. So I think what is going to be the future driver is whether the government can sustain future borrowing without causing additional inflation. I think they might be able to because they have the deflationary influence of a) collapsed financial instruments and b) reduced borrowing by the population.
The government have essentially used the taxpayer to back current housing levels, in so far as possible, and it remains to be seen how deep the recession will be. Also, I have no idea how many future unemployed are living in flats above the mandated housing benefit rent level.
I think that instead of the housing price drop estimates, which everybody seems to love, (50% in 5 years etc), that of much more use would be the maximum level of unemployment we will face, because that is what will end the impasse.
9. mark wadsworth said...
Stillthinking, that's another one of my pet rants!
Paying Housing Benefit to private landlords* is a straight subsidy to property ownership and sets a floor under rents meaning that yer hard working private tenant has to pay higher rents than would otherwise be the case.
Like Agricultural subsidies, it is a form of negative Land Value Tax. If LVT is the least-bad tax, then Agricultural Subsidies and Housing Benefit for private landlords must be the worst subsidies.
* I have no objection to council housing for the very poorest, different topic.
10. Still-waiting said...
@ 8. and 9. Too true. Problem is, providing decent council housing is visible and people don't like seeing their taxes go towards it. Housing benefit quietly pumps loads more money into the hands of private owners, with no asset for the taxpayer - but it is not noticed.
11. str 2007 said...
Harold & Beartil2010
I mentioned in an earlier post today that given stock prices are/should be based on current/future profits and that a large proportion of 'actual' profits come from a companies last bit of turnover (ie when all the overheads have been covered) then a fall in turnover of say 10% will likley have a far larger effect on profits than 10%.
If we are going where it looks like recession/depression then that makes the stock market as a whole look fairly overpriced to me. Obviously some sectors banks/builders have been absolutely wacked but for the market to be only 20-25% off peak as a whole seems to me to wildly optimistic.
As for the 8% gain in a day recently. How on earth does moving massive debt make everything ok again - it's still there. It's like moving a full credit card onto your mortgage and saying party on dood.