Tuesday, Jun 06, 2017

House price = capitalised value of rental income

Torygraph: Rents follow house prices and show first fall since 2009 crisis

Homelet data records rents falling in May. I look forward to talking with my landlord about this ;-)

Posted by nickb @ 02:06 PM (5333 views) Add Comment


1. jack c said...

Nick, I don't think Fergus will drop your rent as Judith has the final say (LOL)

Tuesday, June 6, 2017 03:19PM Report Comment

2. britishblue said...

As with house price drops I am surprised that it has take so long to come through in the news. Not sure we have had a time where both house prices and rents were falling at the same time. Back in 1989 rents were quite cheap and not unduly affected when we had the crash. Interesting times

Tuesday, June 6, 2017 03:46PM Report Comment

3. mombers said...

I love the puzzled look on all the landlord's faces and the neoclassical economists who were convinced that all the tax rises would be passed on to tenants. No doubt some fanciful explanation will be concocted...

Tuesday, June 6, 2017 03:46PM Report Comment

4. icarus said...

@2 - true, rents and prices can go in opposite directions (what does that do to nickb's headline?). E.g. there are times when new owner-occupiers compete for tenants (downward pressure on rents) to help pay the (otherwise unaffordable) mortgage on a house they've bought in what they judge to be a rising market.

Tuesday, June 6, 2017 08:04PM Report Comment

5. libertas said...

Not a chance. We are at the equivalent of the year 2000 in the last cycle, with Brexit being like the blip of Y2K. Just look at the chart below to see the parallel and where we are in this CYCLE. If this is anything to go by we have about another 7 years of this bull market, taking us to around 2024, when Dow Jones will be at 35,000, FTSE100 will be at 20,000 and there will be an almighty crash and then the party starts again.

Or are you suggesting that the multi-century period of currency inflation that began in the mid-1700's is about to end and that we will fail to breach the average price line this time around?

Tuesday, June 6, 2017 10:57PM Report Comment

6. techieman said...

I don't really hols much store in that chart. Basically because its not a homogenous product. But OK let's assume it's worthy of analysis.

The cycle highs are at 1980 , 1990 and say 2007. So 10 years, and 17 years.

17 is in proportion to 10 in the golden ratio. Cycles often exhibit this difference and then can revert to the prior cycle length. Of course cycle theory is not normally based on ONE cycle but the confluence of many.

This doesn't mean Libby is wrong... just it's a over-simplification.

What is difficult for any analysis is to determine when a turn will come. Libby has veered from no falls due to immigration front running / city skyscrapers etc. He now says we may have a blip.

That is not to say Libby is wrong overall. The 18 year cycle does have a degree of validity... but if you read between the lines of Harrison 's boom bust book it's sounds like the caveats he makes to its continuance are those which apply now..... or maybe that's just wishful thinking on my part !?!

Wednesday, June 7, 2017 09:34AM Report Comment

7. nickb said...

Libby if you extend that chart back from 1975 a few decades you will be in for a shock.

Wednesday, June 7, 2017 01:20PM Report Comment

8. nickb said...

Sure. The headline is supposedly a long run equilibrium relationship, ie when we are all dead ;-) Have not looked, but I imagine you can find cross sectional evidence of strong correlation between rents and HP in different locations, and over time they will be "cointegrated" within an area... That is, it's unlikely they will drift too far apart for too long otherwise it starts to make sense for e.g. renters to buy or vice versa.

Wednesday, June 7, 2017 01:24PM Report Comment

9. jack c said...

I'm not convinced by the reference to Cycles given that in the recent past there was no QE (Japan aside). QE has given rise to a tide that has floated all boats and now it has largely been either suspended or put on tapered withdrawal. QE money hasn't ended up where it was intended and is instead reflected in asset prices - some argue that everything is simultaneously in a bubble - Bonds, Property and Equities.Often things aren't quite what they seem - if you strip the rise in the FANGS out of the S&P 500 it's relatively flat not shooting the lights out.

Wednesday, June 7, 2017 03:33PM Report Comment

10. techieman said...

Jack... winder when we will be saying "Fangs for the memories" ??

Wednesday, June 7, 2017 05:12PM Report Comment

11. jack c said...

TM - wonder if we get some 'Fall Out' (Boy) from the markets on Friday ?

Wednesday, June 7, 2017 06:08PM Report Comment

12. tenyearstogetmymoneyback said...

There is a very simple - non technical explanation for cycles.

How many people can remember the last crash.

Back in about 2003 a young colleague was buying his first property and was completely unaware that the housing market had sometimes dipped. I guess he wan't interested in property prices when he was 15.

It will be interesting to see how this plays out. The 1990s crash effectively started on the day dual MIRAS ended.
Once people see prices are dropping they will hold out for lower prices.

Thursday, June 8, 2017 10:45AM Report Comment

13. techieman said...

10 years... wondering if the increase in SD , and the rush to buy before the 3% 2nd home imposition is the 2017 equivalent ? See jacks article really transactions subsequently.

Are BTL's "All in".

Friday, June 9, 2017 09:10AM Report Comment

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