Sunday, Dec 14, 2008
Housing glut continues
Observer: Estate agents fear collapse in rents as 'reluctant landlords' flood the market
Can't sell for an inflated price: can't let for an inflated price. How the cards are tumbling.
I would really like to meet Zaza Patterson in Winchester though. Mind you, I wouldn't know whether to say "Good morning, could you tell me the state of the rental market at the moment," or "Darling, I love you".
Posted by letthemfall @ 03:01 PM (1663 views) Add Comment
25 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. paul said...
Let the collapsing commence!
2. uncle chris said...
These people really do think the market is going to bounce back within a couple of years. I suspect the days of cheap available credit are gone for at least a generation, and that we will see the UK mirror the 20+ year slump seen in Japan - especially with the governments crazy course towards 0% interest rates - didn't help Japan.
3. happyrenter said...
already happening here right across the price range - even prime high end detached house rents have fallen 20% in the last couple of months - local letting agents gone on record in local paper confirming it.
Now that's really going to support for sale prices (not!)
4. amjidk said...
so much for the "rents increasing because less people are buying" argument!! wander what assetz will come up with next?
5. happyrenter said...
....oh, and Hamptons are doing their '50% off first month if your tenancy starts in December' malarky
another letting agent has offered one property as a 'first month free'
This has got a long way to go as there are half a dozen new build mini-estates will almost nothing sold, and they will have to be up for rent pretty soon....
6. plato said...
Good!!!.......... High property values= High rents.
7. drewster said...
December is always a quiet time of year for letting agents because of the holiday season. However family break-ups are more likely to occur over Christmas than at any other time of year, so January is the busiest month for letting agents. If this year is different, we'll know from the letting agents bleating in February. For now though it's just the seasonal blip.
8. quiet guy said...
"'You have properties that have been refurbished for sale - real high-spec properties - now coming up for rent,' he says. 'These often make traditional rental properties, with their B&Q kitchens, somewhat tired by comparison ..."
Yep! I wholeheartedly agree with the description of 'traditional' rental properties.
9. stillthinking said...
Ages ago I put a link up to a graph of Japanese rents while the house prices collapsed to 20% of their former value (I looked but can't find it but I remember what was on it).
The rents only went down about 10% basically.
The prices of housing collapsed because it became impossible to get loans, rents are from income which is different. I would dearly love to see a reduction inrents personally, but I don't think that will happen even though the cost of housing falls.
10. str 2007 said...
still thinking
That's an interesting observation.
One point though, if people can't sell a property and put it up for rent (increasing the amount available for rent) who rents it if no-one else can sell it.
I do agree with the theory, I just can't get my head around someone renting a 500k house which has reduced in price to £100k and rent that house for £1500 per month (£18k p/a).
A mortgage for that property would be £500 per month interest only at 6% interest rates. Surely the bank would rather 'rent' it to an individual (who can afford £1500 per month) for say £750 per month.
Effectively the rent over 5 1/2 years would buy the house outright. I can't believe anyone out of principle would pay that level of rent.
There must have been more to the 80% HPC against 10% reduction in rents in Japan.
Unless of course rents were already very cheap before the house price boom and rents didn't go up in line with the houses.
Not critisising, just observing from my brains perspective.
11. str 2007 said...
My view on current uk rents is that they are very expensive.
For them to be any sort of long term housing solution they would need to halve at least. Based on the fact that if they were to be long term then the tenant would need to establish a fund of several hundred thousand pounds to enable them to rent through retirement.
Also alot of properties that come on to the rental market due to the inability to attract a sale may well only have a small mortgage on them so the going rate maybe £1500 per month, but if there is a £750 per month mortgage to cover the forced landlord maywell be happy to accept £1000 per month.
So I personally see that rents could quite quickly fall by 30% say over the next year. The main reason is that a £300 a month shortfall on a £1000 per month mortgage can be covered, where as £1000 p/m mortgage with no tenant can't. This is more instant than coming to terms with the fact your house has devalued by 10% over the last 6 months and to get ahead of the wave you have to reduce your sales asking price by 15%.
12. amjidk said...
im not sure rents will fall very far, as they haven't risen much compared to house prices, rather house prices will probably come down considerably until the long term rent to price ratio is reached..
13. stillthinking said...
@str2007
The Japanese banks are notoriously risk adverse, and Japan as a country has no concept of limited liability. For pretty much everything you have to get a friend to share liability, called a "guarantor" ( no reason to put that in quotes :) ..) . Even for something small. I lived there for nearly 4 years and not having a guarantor was a major pain.
Renting a house in Japan includes getting somebody you know to accept an unlimited liability on your behalf. There is a reason why Japanese people take their friends seriously and give presents all the time. I am sure JU would confirm this (if he is Japanese or just very knowledgable about the place !).
Borrowing at a personal level only happened fairly recently in Japan, which is famous after all for being cash based.
I totally agree with you that UK rents are ridiculous, and I think that Spain will come out of this well, because their rental costs will be nothing, and their future golden after this has passed, fundamentally they seem on the up. They have enough houses for China. But, money you have and money you borrow are two different kettles of fish. Rent is based on market demand, price has been based on insane monkey reasoning.
Anyway, I am more desperate than you for lower rents (maybe), and everything I looked at about the Japanese rental market ( and I did ask lots of Japanese people too) gave me the impression that it didn't change that much. I think perhaps rents will go further down but I don't expect anything dramatic.
A huge collapse in employment will change rents, which Japan didn't have. But will you have a job? Will I have a job? Kind of a moot point really.
14. stillthinking said...
@str2007
The Japanese banks are notoriously risk adverse, and Japan as a country has no concept of limited liability. For pretty much everything you have to get a friend to share liability, called a "guarantor" ( no reason to put that in quotes :) ..) . Even for something small. I lived there for nearly 4 years and not having a guarantor was a major pain.
Renting a house in Japan includes getting somebody you know to accept an unlimited liability on your behalf. There is a reason why Japanese people take their friends seriously and give presents all the time. I am sure JU would confirm this (if he is Japanese or just very knowledgable about the place !).
Borrowing at a personal level only happened fairly recently in Japan, which is famous after all for being cash based.
I totally agree with you that UK rents are ridiculous, and I think that Spain will come out of this well, because their rental costs will be nothing, and their future golden after this has passed, fundamentally they seem on the up. They have enough houses for China. But, money you have and money you borrow are two different kettles of fish. Rent is based on market demand, price has been based on insane monkey reasoning.
Anyway, I am more desperate than you for lower rents (maybe), and everything I looked at about the Japanese rental market ( and I did ask lots of Japanese people too) gave me the impression that it didn't change that much. I think perhaps rents will go further down but I don't expect anything dramatic.
A huge collapse in employment will change rents, which Japan didn't have. But will you have a job? Will I have a job? Kind of a moot point really.
15. str 2007 said...
still thinking
That makes it easier for me to understand the Japanese situation, thanks.
Still think we could see 30% off rents here over the next year as things worsen.
Alot will come down to whether or not this country has enough houses.
I suspect it has.
16. mytimeisnigh said...
I think that rents are over priced. In my area, I've noticed a few 'try before you buy' schemes coming onto the rental market, whereby builders of new developments can't sell their properties, so offer them for rent at a redced price, undercutting the already bloated rental market. I hope that this will help in bringing rents down by around thirty percent, whilst at the same time, putting numerous buy to let landlords out of business and into repossesion. Subsequently, flooding the property market with homes, accelerating the house price crash.
17. stillthinking said...
Fingers crossed !
18. larry pickleman said...
I've just got a lovely 2 bed place in brighton for £800 a month, would easily have fetched at least 1k a year ago....still too much but I'm not complaining...
19. plato said...
Don't worry (if you can say that nowadays). Rents will be down substantially next year from the silly highs. It's all a question of affordability on both sides of the fence. The new builds in outer areas specially built for second homes and btlers will lead the way taking people out of the city and causing oversupply and competition in urban areas. The cost of living is too high - full stop - it's not just the rent you pay and there is no more living on credit. In addition wages aren't exactly going through the roof.
As always there is more demand for practical,smart locations so I don't expect a lot of movement here.......but the way things are going this could change as well. There will be a lot of repos on the market too.
IMO expect a 30% average reduction (mid 2009) most certainly if you are prepared to travel a bit.
Let's get some sanity back into housing.
20. bertywooster said...
IMO if a saver can expect 0% return on their savings, then it is reasonable for a landlord to receive 0% return on their property i.e. no rent. Therefore properties should be let rent free. Are you listening Gordon? Go for it!
21. Finknottle said...
Lets get this right.
1) people cant sell houses
2) More people start to rent their property.
3) which means more property on the market
4) which means more competition
5) which means that rents comes down
Question - where are all the people going to who decide to rent their houses out? - are they
1) renting somewhere else
2) just renting the second home / or the 3rd home
3) going to stay in their overseas home?
4) going in to retirement home
5) going to the graveyard home?
I thought we were 5 million houses short - that we need to build everywhere because people have nowhere to live?
Can someone please explain????
22. This comment has been removed as it was found to be in breach of our Blog Policies.
23. mytimeisnigh said...
@ 21. The housing shortage has been a populist story peddled to keep house prices high. In reality, there are thousands of homes standing empty. The recession will see many economic migrants returning to their homeland. Plus, people who could previously afford a flat or house on their own will share or live with parents, equally some home owners will be forced to take a lodger, thus leading to a housing over-supply.
24. Archiejc said...
Of course rents are going to fall. Massive newbuild glut. Surely the oversupply in the newbuild sector is going to push all rents down in time, as people shift into cheaper properties.
No point feeling chuffed about it though, as most of us won't feel the benefit. The whole bloody lot's coming down and our jobs with it. I'm counting down to joblessness next year, my savings are worth sh*t if I have to relocate overseas, I can't get a mortgage anyhow (even with falling property prices) without job security. I work in a very specialised area of industry which I have trained in for 16 years to get full accreditation, and only the other week 10% of my entire professional group in the UK applied for a single job! Now that's what I call competitive! Hold on tight folks, we're going to get a hell of a lot more than a fall in rent!!
25. str 2007 said...
mytimeisnigh
Couldn't have put it better myself.