Thursday, May 28, 2009
Rent Price Crash over?
BBC: Downward trend in UK rents 'ends'
Typical UK rents remained unchanged in May after nine consecutive months of falls, according to a property website.
The average asking rent remained at £819 a month, said Findaproperty.com, although this was still 5.5% lower than the same month a year ago.
A rising supply of flats meant these were becoming cheaper to let, in contrast to houses.
Every area of the UK has seen average rents fall in the past year, the survey of 414,000 properties suggested.
Posted by little professor @ 11:25 AM (1563 views) Add Comment
27 Comments
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1. last_days_of_disco said...
2 things:
1. Spring bounce in rental prices is just holding things steady for a bit.
2. They are rental asking prices from find a property, they are not the actual agreed price which is these days often below the asking price.
2. paul said...
The BBC no longer needs figures to back claims like this up - they only need opinion from VIs and a good headwind from their own staff maintaining their amateur BTL status to publish claptrap like this.
3. stillthinking said...
What I find so irksome about this, is that the government holds up rents, they are not based on the markets ability to pay. When you think about national insurance (!) contributions, but when you actually claim, you will receive £60/week. Your landlord on the other hand will receive £150+ a week.
There is no ability to pay for rents apart from the government, for huge swathes of the population. For a shop, if nobody can buy your goods, then you have to sell them for whatever you can get. For housing, the government steps in to support a certain rent level.
Absurd. And effectively a double tax on those who are able to afford rents privately. Lest we forget, this whole house bubble has been based on an implicit deal with New Labour -never- to annouce a large building program. Looking at the shabby broken down London of today, I find rental prices ridiculous, based purely on the restrictions of planning permission.
4. japanese uncle said...
Rents level can be determined by the two factors basically, ie tenants affordability and the level of landlord's 'desperation'. First of all tenants' affordability highly depends on wage level and job security, which are doomed to say the least for the moment. Furthermore, if rents levels are seen to be unaffordable, tenants can adjust their needs for house space, from three bedrooms to two, two to one, and one to studio, or going back to their parents' houses, leading up to the shrinkage of the total demand of space. On the other hand, landlords are more and more desperate these days, because of the climate of the market inundated by the rental properties, besides many of them are suffering negative equity caused by the recent HPC, in which two or three consecutive months vacancy could lead to repossession. Any rent is better than nothing, indeed. Either way, there seems no way that rent can go up in the foreseeable future.
5. techieman said...
JU as you say rents cant go up but as Still Thinking says rents cant go down because of the LHA. Now the issue is why would a LL undercut the LHA?
[s]he has a choice which is blurred. Dont take on a DHSS tenant because they are perceived to only want to trash the place, and receive the rent (assuming the DHSS tennant actually forwards the HB) OR take on a non DHSS tennant who may leave the place in a poor state and "do a runner". Of course there are good tennants and bad tennants - much the same as LLs but what premium is it worth to have a non DHSS tennant? In other words how much (if at all) could a non DHSS tennants rent undercut the DHSS tennant?
6. japanese uncle said...
techieman
To my knowledge 95% of the rental properties advert say No DSS Sorry. Is it really the big issue? May be depending on the area.
7. Hmm said...
In my street in far west london a typical victorian rental is now £1000, which is just a touch lower than the rent when we moved in in 1994, 15 years ago.
8. techieman said...
JU my understanding is that the HB is based on a median price for a property in that area, based on how many people are going to live there. This strikes me as odd because the median price is determined by HB and vice versa - chicken and egg.
You are right for say the more upmarket properties in the area - these come down in price which would affect the mean but probably not the median. So although you may be right about the 95% not WANTING DHSS their choice may be limited - particularly if more liquid tennants become unemployed. My question is a LL has to price the hassle factor. Everything has a price!
9. Sparky300 said...
does anyone know how much the DSS pays for rent? I have heard it is £75 per week max
10. Sparky300 said...
does anyone know how much the DSS pays people for rent these days ? I have heard it is £75 per week max
11. debtfree said...
Moving into a new place next month.
Agreed price with 10.5% off, took some haggling though.
12. stillthinking said...
ju, I think the system in Japan is different. DSS property is not advertised in that way. The councils find accomodation, and they then assign accomodation to the tenant. It is not quite the case that a DSS tenant looks for their own flat. Perhaps in adverse circumstances yes, but typically no. Landlords, presumably after giving up on a private tenant, only need to make their accommodation available, because there truly is a shortage of social housing.
Also, JU, there is a big difference between what a private unemployed individual could get as a contribution to their housing costs, as opposed to the amount that the -council- would pay as they are legally responsible to house certain groups. This had led to the council paying absurb above market rents because it is the old pick a figure out of a hat pricing, not market level.
techieman, you are absolutely right, dead on the money, HB -is- based on the median rent, and acts, from that, as a pin on pricing ! Truly it is a horrific scam, and when you add in the "deal of the devils" house bubble, which NO WAY would have taken off if there had been -any- risk at ALL of New Labour announcing a comprehensive building programme, then the only conclusion you can draw is that we are systematically ripped off and all UK housing is dramatically overpriced.
As it happens, I have rented two different flats in Japan, I had a much nicer one than I could probably afford in London while in Sapporo (a bit cheese and chalk perhaps) which cost £350 a month. The big difference being that Japan does not constrain planning permission in the same way as the UK. So should there be any margin to be made at all, Japanese builders will rapidly put up very cost effective high density housing.
Bloody scam. The really sickening thing is that there is no real way out. In the UK we have become victims of the nasty American mentality which you notice, they are so anxious to maintain their impossible dreams of wealth that they maintain a system which places them in relative poverty. Same here, we don't dream of affordable housing and moving onto production based wealth, lets be clear, that isn't and won't be on the agenda, we put up with our sh*t little boxes, and dream of the day we can put somebody else in them and live off the proceeds.
Bah !!!
Basically the government are the ONLY supporting factor against rents. Both in direct taxpayer subsidy and indirectly through planning restrictions, the gullible(stupid) British having swallowed the myth that high density housing, which works so well elsewhere, is something to be avoided.
13. stillthinking said...
Just to reemphasis the point. The NO DSS tenant advertisements are a tiny irrelevant portion of the market. This is no where near a market place. You (the landlord), contact the DSS, they look up your price on a list.
On a list. Not a room of people bidding, not advertised.
On a list. Fixed.
Then the DSS assign that property to tenants. The tenants contribution towards costs is a different list. No interaction. No market. No bidding. And we are talking about huge swathes of property in this. Absolutely no way is UK rental free market economics. Not even close.
14. stillthinking said...
sorry, can't stop because I feel strongly about this.
At the moment the UK's future is being crippled with government debt, we all know this. Through a collapse of revenue and an according increase in social security costs.
But where does the bulk of social security money go? Straight into rental yields! Further, the system absolutely bypasses the tenant because they never see the money. They are not given the money and then told find a property.
The payment goes directly to the landlord !!!!!!
Even those who admonish the state and propose reductions in spending invariably propose that services will be cut, there is no political or public will at all to create a market in housing.
15. techieman said...
ST - i dont think thats right "But where does the bulk of social security money go? Straight into rental yields! Further, the system absolutely bypasses the tenant because they never see the money. They are not given the money and then told find a property."
I THINK it now goes to the tennant and the tennant is responsible for paying it - so [s]he can be a big [girl] boy. I could be wrong but im pretty sure i read that somewhere. I can appreciate your angst though.
16. techieman said...
ST:
"Housing Benefit is paid by your local authority.
If you are a local authority tenant, you will not get your Housing Benefit paid to you directly. Instead it will be taken off your rent so that you either pay no rent or a reduced rent (also known as a rent rebate).
If you are a private or housing association tenant and you don't come under the Local Housing Allowance rules, you may get Housing Benefit paid directly to you or to your landlord, depending on your circumstances.
If you come under the Local Housing Allowance Rules, your local authority will normally pay Housing Benefit to you, rather than to your landlord. You will not be able to choose to have it paid direct to your landlord. However, there will still be some circumstances where your local authority can decide to pay Benefit direct to your landlord instead of you, for example, if you're unlikely to pay the rent or have difficulty managing money.
If Housing Benefit is paid directly to you, this will be by cheque, giro cheque cashable at the Post Office, or straight into your bank or building society account.
Housing benefit is usually paid in arrears. This means that it is paid after your rent is due. It can be paid weekly, fortnightly, every four weeks or every month, depending on how frequently you pay your rent. You have a right to be paid fortnightly if your housing benefit is £2 a week or more and it is not being paid to the landlord.
For more information about payment of benefit, see Payment of benefit and tax credits.
If you have problems with the way your housing benefit is paid, you should consult an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest "
So we are both right and wrong!!
http://www.adviceguide.org.uk/index/life/benefits/help_with_your_rent_-_housing_benefit.htm
17. stillthinking said...
techieman, my point is not about the mechanics of it. and in fact I am not an outraged claimant, I am an outraged renter.
just that to me it seems that government expenditure is used to prop up rents which would otherwise be unsupportable. almost certainly I am unreliable on points of detail.
My point is the rental market in the UK is rigged with government expenditure and would be lower otherwise.
18. techieman said...
Agreed - we are all outraged tennants - in some cases though its better to be in ignorant bliss as to why we are outraged! :-). I understood where you were coming from - but the mechanics IS a point. If the landlord doesnt get the money direct then he is (even?) less inclined to want DSS "clients", my question is how much is that worth.
So if say the HB for a 2 bed flat is £880, would the LL be willing to accept £800 or £850 (or whatever) to know that he would get the money and possibly have a hassle free life (i am generalising here and talking about LLs perception of DSS tenants - its not my own view).
As i said if you live in a plush 2 bed then the "floor" would not be so much of an issue. So i rent a 2 bed for £1500 (say huge beds and air con / balcony etc etc) then that can come down to what the market will bear.
In fact that may mean that you could get a much better place if you shop around a bit - as all places could tend toward the floor price.
19. japanese uncle said...
Stillthinking
GBP350/mo in Sapporo!! Quite cheap, though if it was a one-bed-room flat, it might not have been too cheap. But you must have spent a fortune for winter fuel.
20. mander said...
there are 20% of properties still on the market and take now too long to rent, plus more flats to be completed and to come to the market plus eastern Europeans start to leave plus more unemployement that suggests a 30-50% fall in rents.
21. bellwether said...
ST I'm not convinced by the undersupply of property. We have a shrinking indigeous population with the demand on property only increased by the tendancy to live alone and immigrants.
The tendancy to live alone is a credit boom luxury - and fracture of family life depending on how you look at it. Either way we are breeding less. Anyway living alone is really like eating caviar.
Migrants is a weird one, mostly working in poorly paid jobs, and here because of the boom and the strong pound, both factors that have evaporated.
22. bellwether said...
Although do agree with you on the rent point, although it is not really property that is being protected but the illuision of wealth in trying to keep credit based consumer spending going, to keep our ecomony going.
I'm sure the game is up but the change will be long and gradual and paradoxically if we are lucky it will not be too permanent
23. stillthinking said...
Irrespective of the supply the market is funded by government who block price discovery, simply this is not part of the role of government. While I personally think rising unemployment must exert downwards pressure on rents, we have already been advised that taxes will rise/services will fall before this ever gets changed.
This is just talking about the degree of support, not whether the market is supported. Certainly should the government halve their prices, the private market could not expand enough to support rent levels. Part of the New Labour scam. There are certainly vulnerable people out there but to suggest that "oh,if we don't pay then the landlords will pull out of social housing.." They can't. They would, like people in so many situations, have to take what they could get.
Incidentally, this is why I feel the future of Spain will be much rosier than the UK, they have built so much, they have killed off the role of the rentier. There is nothing to support rent levels.
ju, this was three years ago before sterling collapsed. I paid 5.8 man(58,000)/month. one bed flat. quite spacious. I couldn't afford to heat the place properly in winter though (5 months long) which was when I realised a smaller place would have been a much much better idea.
24. Hmm said...
"there are 20% of properties still on the market and take now too long to rent, plus more flats to be completed and to come to the market plus eastern Europeans start to leave plus more unemployement that suggests a 30-50% fall in rents"
A typical victorian terrace in my west london street is now @1000pcm. 15 years ago when we moved there, before the big eastern european influx and/or BTL boom it was.........@1000pcm
does that mean we can expect 500-700 pcm now?
25. bellwether said...
But the debt needed to keep this and all the other scams going is already well in excess of capacity of the state, our true poverty is being exposed and our incapacity to leverage out of it will surely follow.
26. stillthinking said...
bellwether, the state is not going to do anything to disrupt rents. services down yes. fewer doctors yes. allowing rents to fall would be a market meltdown. so actually they can keep going.UK taxation just becomes a more and more absurd ripoff. We already heard the somewhat weird announcement, services will be going down, taxes going up... anyway.
27. little professor said...
You can check how much the level of Local Housing Allowance is on the scheme's website:
Here
Check how much they pay for a typical 2-bed place near you. You'll be surprised how high it is - for me it's well over what I am paying for my 2-bed flat, and I earn almost three times the national average wage.
The LHA does help keep rents high. Landlords will automatically charge the highest amount they can under the scheme, even where the open market would not support such an asking price.