Tuesday, Dec 16, 2008
Unemployment is up – and tenants are more likely to default
Independent: Rent arrears haunt landlords
After seeing at least 15 per cent wiped off the value of their property investments in the past year, it seemed that landlords on variable-rate mortgages could at last breathe a sigh of relief thanks to the recent dramatic cuts in the base rate. But already they are faced with a still graver problem: the growing prospect of rent arrears. 71 per cent of landlords expect tenants to fall behind on their rent during the course of next year as unemployment shoots up and the credit crunch bites harder. "If you have two buy-to-let places and one tenant doesn't cough up, that's half your rental income." [Wow, what an insight. Do they get paid to write that? Here's another insight:] "The bedsit end of the market is usually considered high risk when it comes to defaults on rental payments."
14 Comments
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1. new user 2007 said...
Something that has not been considered at all is people or families renting out just rooms to individuals or couples. This has happened for years with language students in London. Now that the indigenous population is suffering from tight incomes and uncertainty, a lot of people I know in London that were going to rent out houses/ flats by themselves or in house/ flat-shares, are now talking about sharing with a family (as the family just wants a modest income supplement rather than a "rate of return" they do not charge as much as BTL that is not owned by anyone living there). Sharing with a family has always been cheaper than sharing with other renters because of this financial dynamic.
2. mark wadsworth said...
The longer I think about all this, the more I come to the conclusion that we (as a society or economy) took a wrong turn a century ago (or something). Basically, instead of moving from 90% private tenants to 70% owner occupiers, we should have moved to 100% council tenants.
If we all lived in rented council housing*, none of this would really be a worry, it would all average out. Yes I know in practice the State is rubbish at running housing, but in theory it would have worked fine.
* Obviously, there would have to be everything from council bedsits for paupers all the way to council executive homes for the wealthy. The Queen and the PM live in state-owned housing and they seem to manage.
3. bertywooster said...
Interesting point but I cannot imagine the PM suffering the anti social effects of a feral chancellor of the exchequer.
4. mountain goat said...
By the time this is over BTL will go down in history books together with tulips, and BTL investors will be discussed as examples of The Greater Fool Theory. In the mean time BTL investors have sleepless nights and slowly realise they have made the worst financial decisions of their lives. Almost makes me feel sorry for them.
5. Cartimandua51 said...
Re Mark Wadsworth's comment - if you are the same mark wadsworth I remember from 20 years ago at South Bank, you're the last person I would have expected to suggest handing over such enormous power to the State. If the state is the monopoly supplier of such a fundamental necessity as housing, then the state will abuse that power sure as the sun rises. Whether it's in the name of equality, social benefit, tax-raising or whatever everyone will end up living where the State wants them to live. Unless you envisage a sudden return (? development?) of an honest, intelligent, non short-termist executive?
6. inbreda said...
Mountaingoat! stop that! Just remind yourself of the gloating of the "property entrepreneurs" who were so clever and smug and looked down their noses at you from their elevated opsitions in their "I don't care if I am creating more pollution than you" BMW X5s.
Nothing, but nothing should make you feel sorry for them.
7. drewster said...
MarkW,
The Soviets tried council housing for everyone, it produced some of the worst architecture in the world. By contrast some of the best architecture was produced by giant landlords such as the Duke of Westminster, whose ancestors commissioned the building of much of Mayfair and Belgravia. At the time, he was competing with other landlords in London who were also building large estates - for example the Russell family who developed much of Bloomsbury. This capitalist competition, including landlordism, led to some of London's best architecture.
I find it difficult to square my loathing of landlords with my admiration of some of their work. This is a huge topic which we could discuss for ages.
8. str 2007 said...
mark w
Well I'd rather own my own house (and I'd prefer it if everyone else did aswell). I wouldn't want to live on a council estate the size of the country.
I believe the feeling of owning gives people a good sense of worth.
Where it goes wrong is how governments try to achieve the aim of 100% home ownership.
Inbreda
Totally agree - apart from the bit about BMW X5's - I don't own one - however if someone owns a 30mpg X5 and drives 7000 miles a year they use 233 gallons of fuel. If someone owns a 40mpg car and drives the average 12000 miles a year they use 300 gallons of fuel.
Now who pollutes the most.
Further shouldn't you be tarring anyone who uses planes for travel (I don't by the way) with a similar brush.
Needed to get that off my chest - no offence.
9. montesquieu said...
@ str 2007
couple of flaws in your pro 4x4 argument
1) A car that does only 7000 miles is likely to be mostly doing town driving and there's no way an X5 does even close to 30mpg around town.
2) Total pollution isn't the point it's the fact that unless you live up a farm track it's completely unnecessary to drive a toss*erwagon like an X5 in the first place - a proper car would pollute a lot less for those 7000 miles.
The besuited wage 9-5 middle management wage slaves and airheaded school run botox-bottle-blondes who drive these sorts vehicles are sticking two fingers up to the planet every time they climb into one. That's why they are so offensive.
10. str 2007 said...
montesquieu
I understand your views, however I do find that that particular view point carries a very basic :- it's a big car, I can't afford one, I'm therefore jelous, but to cover that up I'll attack from a different angle to make me seem better than them.
I rarely see sports cars inluded in the venom targetted at 4x4's.
If you've flown anywhere in the last 3 years then your views would be hypocritical IMO.
The damage is caused by ones total carbon foot print - not 1 particular part of it.
You just pick on that one because it is visible to you.
11. mark wadsworth said...
@ Cartimand, it was 1993 to 1996 IIRC.
The downsides to this cunning plan have been outlined above, and I agree it might not work in practice.
I could refine it
1. The state is not monopoly provider - different local councils compete with each other.
2. With all the social rents coming in, there'd be no need for income tax or VAT and so on.
3. Sure, private landlords provide better quality, so I'd allow them as well, in exchange for a 90% income tax rate on their profits (but again, no income tax on normal tenants).
4. At least we wouldn't debt slaves and tax slaves.
5. Feudal tax systems (i.e. land value tax) are the least bad systems.
6. Provided you pay the rent, you still have a home for life.
It's a thought experiment more than anything. If you think that the Duke of W has The People's interests more at heart than the government has another think coming - they are as bad as each other, actually.
12. David Smith's Sub Prime. . . said...
Mark,
South Bank Poly explains your problems!
13. montesquieu said...
@str2007
Big-engined sports cars are in the same bracket but there are far fewer of them than pointless 4x4s. My MX5 is in the cheap band for company car tax and I get the change from not driving a big tosserwagon (that I'm entitled to by grade) in my pocket while feeling good about not driving around spewing CO2 looking like an unimaginative plonker.
14. str 2007 said...
montesque
I apologies, clearly you can afford an X5, although to be fair I don't think they're on many company car lists.
And an MX5 is an excellent little sports car.
Was it the guilt from all those flights you took that made you choose an MX5 over and X5 ? ;-)