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It's Grim Up North - But Only If You're A Landlord Or Developer

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It's grim up north - but only if you're a landlord or developer

Tenants in the north-west and Yorkshire are enjoying the biggest rent falls in the country as landlords and developers compete to let out huge numbers of flats.

In north-west England, which includes Manchester and Liverpool, rents are down an average of 15.7% over the past year to a typical £580 per month - although canny tenants often secure further reductions. In Yorkshire rents are down 7.9% in the past year to £558. In the West Midlands 6.2% and in the East Midlands 3.4%.

The exception is the north-east where rents are down just 0.8%. This area includes Newcastle, where the council rejected many schemes by developers for large numbers of flats, and at one time introduced a moratorium on new building.

These figures, from findaproperty.com, contrast with modest falls in Scotland and southern England, and even small rises in some regions.

The reason behind the divide is simple: the supply of new flats in northern cities has soared in the past two years, just as landlords and owner-occupiers have found it increasingly difficult to buy them. Developers, keen to recoup some costs, have started renting out the flats they cannot sell.

Christopher Brown-Colbert, 25, is one tenant who has taken advantage of the glut. "There's so much choice. When I first rented in Manchester five years ago I was shown just two flats and had to snap up one of them. Now there are scores to see, each with incentives. There's more choice than ever and you can trade up to a bigger place yet pay the same as last year," he says.

He and a flatmate each pay £375 a month for a two-bedroom flat just built in Castlefield by developer Dandara. It is close to the university where Brown-Colbert is completing a five-year architecture degree.

"It's a big apartment with more space than we know what to do with and there's a balcony. We got the developer to pay the water bills too. It's a much better deal than I had in a different flat a year ago," he says.

Across the UK the number of houses to let has fallen this year - down 1.2% in May alone, meaning average rents are rising because demand exceeds supply. "In stark contrast, the supply of flats for rent rose for the sixth consecutive month with a 4.9% rise month-on-month in May 2009," says Andrew Smith, head of research at Findaproperty.

Even better news for tenants is that rents in northern England and the Midlands may fall further as the oversupply of new apartments is set to worsen in the short term.

Research by property consultancy Drivers Jonas shows that in Liverpool just 189 new apartments were built in 2001 while 1,022 were completed last year. Another 730 are under construction, and planning permission exists for some 4,500 flats.

The firm says an estimated 2,500 new homes will be finished in Manchester this year, the vast majority of which will be flats - a 50% rise on 2008. But as developers switch plans, so the number of new flats scheduled for completion in 2010 is likely to fall to less than 300.

The glut of apartments in many city centres creates problems for long-standing landlords. Most of them paid top dollar for their investment properties some years ago, so have high mortgage commitments. But their rental incomes are now falling as they compete with developers letting out unsold newbuild flats. Those landlords tempted to sell their properties find they cannot afford to match the big discounts on new-build units being offered by desperate developers.

"The purchase price for flats in our area has halved since its peak of 2006-2007," says Andrew Duncan of Liverpool estate agent JB & B Leach.

However, this tenants' market will not last forever. A developer in central Leeds has switched its scheme from flats to student accommodation to avoid adding to the glut of homes, while another developer has withdrawn a plan to build a £100m scheme of flats.

Across the UK, more than 50% of properties built recently by Barratt Homes were flats, but the firm says it will cut that figure to 30% by mid-2010. Britain's biggest builder, Taylor Wimpey, has cut its share of flats from 40% in 2007 to 26% now.

In time, those changes will feed in to the lettings sector and may mean an end to falling rents. In the meantime, however, it remains a tenant's market in the north - with further rent reductions to come.

The cat is out of the bag now.

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I must admit, I'd been expecting an HPC.

This RPC is an unexpected complication.

now's a good time to lock in a nominally fixed long term rental agreement with an unleveraged landlord who's retarded enough to think we'll have deflation for the next 5 years.

which is exactly what I'm doing next week. :)

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now's a good time to lock in a nominally fixed long term rental agreement with an unleveraged landlord who's retarded enough to think we'll have deflation for the next 5 years.

which is exactly what I'm doing next week. :)

Falling house prices......Falling rents.....rising unemployment.....firms going bust.....houses being repossessed.......individual bankruptcies.

Meanwhile internationrocksuperstar has unlimited faith in governements ability to spend their way out of this mess so that inflation is 100% gauranteed, everybody losing money is saved and any doubters of the governments genius are retarded.

:lol:

I wonder what the recovereh will look like in about 10 years of such lunacy? Who will be producing anything? Or will everybody be buying gold and eating that?

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Falling rents can only accelerate the property price crash as people weigh up the costs of mortgage repayment versus rental payment. With IR rises in the near future as well, I cannot think of a better 'perfect storm' situation than this for the continued severe drop in residential property prices. I might buy a couple in another couple of years, town and country.

Those that bought within the last few years, if they have stretched themselves to afford it, it will be the biggest mistake of their lives by far. Ho hum.

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Meanwhile internationrocksuperstar has unlimited faith in governements ability to spend their way out of this mess so that inflation is 100%

in the first qtr, HMG funded 65% of its spending by Seignoriage. (it was 50% in Weimar)

in April, HMG spending was 4 times tax receipts.

the Reichpound isn't going to be worth much by year-end.

edit: just to be clear, I expect rents to continue falling in real terms.

everybody losing money is saved and any doubters of the governments genius are retarded.

:blink: government's genius? you'll have to explain that one to me.

I wonder what the recovereh will look like in about 10 years of such lunacy? Who will be producing anything? Or will everybody be buying gold and eating that?

well the gov't won't be producing anything - which is the problem really - gov't is too big.

Edited by InternationalRockSuperstar

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"Across the UK the number of houses to let has fallen this year - down 1.2% in May alone, meaning average rents are rising because demand exceeds supply."

Now that piece of the article suprises me.

In various areas I have been checking around the south west, and south Wales, there appers to be a lot more houses up for rent now, than there were last year. Many of which are reluctant landlords who have them up for sale and also up for rent. And because there are so many up for rent, they seem to be taking a while to rent, so rental prices have been showing reductions on my property bee.

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I have to say I am not seeing this at all in the Leeds City Centre market - with which I am very familiar. The heat has gone out of it a little, but most 1 bedroom flats are staying close to the 600 mark, and most 2 bedroom flats are 700+. I am also aware of flats at the top end which are coming off the market for 2k+.

All figures quoted there are frankly crazy when a good house is available for similar prices a little further out.

I'm a committed HPCer, but I'm not as pessimistic as others on city centre flats - specifically rentals. They have at least partly emerged out of changing demographics, e.g. people staying single for longer, more divorces, more bankrolled students, anti-car policies, expensive public transport, students priced out of the south east who stuck around in northern cities post graduation, people forced to rent due to HPI and choosing to spend their time renting in the city rather than outside. I actually fall into all of these categories above and it suits me and many of my friends well.

I think this market will find more support than some here give it credit for. Landlords will have to take a haircut and may get into trouble re IRs, margin calls, refinancing on poor LTVs, but I don't see any changing demographic or situation which will cause a collapse in the rental demand.

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They have at least partly emerged out of changing demographics, e.g. people staying single for longer, more divorces, more bankrolled students, anti-car policies, expensive public transport, students priced out of the south east who stuck around in northern cities post graduation, people forced to rent due to HPI and choosing to spend their time renting in the city rather than outside.

Have you never thought that perhaps you've confused cause for effect (and vice versa)?

Let's see how quickly demography reverts to mean as disposable income turns negative...

(here in my part of E14 rents have already fallen by a quarter in the last year - and - supply will triple in the next 18mo)

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I got a 5.5% reduction on my big one bed flat in didsbury village (paying £425 a month) the reduction was back in Jan and it was when i first got it - really easy to get - the flat used to be £500 a month, but was up for £450 this time.

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Have you never thought that perhaps you've confused cause for effect (and vice versa)?

Let's see how quickly demography reverts to mean as disposable income turns negative...

There may be an element of that. These prices aren't affordable for the scale of people now paying them in the northern cities.

However, it's undeniable that there are a lot of factors that have made these flats somewhat appealing to young people. Again just in my experience, it's patchy and expensive public transport and the high cost of motoring which makes it the best economic choice for now.

(here in my part of E14 rents have already fallen by a quarter in the last year - and - supply will triple in the next 18mo)

That's incredible if true. Is this new availability from projects that were started in the boom years? New development in most of the northern cities appears to have peaked 2 years ago from what I can see.

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One of the main ways people work out affordablity of property is by rental yields.

As prices fall yields will increase. Hence buying property becomes a better deal than renting.

However if rents are falling at the same time ? The price falls are cancelled out.

Down down down....vicuous circle. Oh well.

Edited by ccc

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That's incredible if true. Is this new availability from projects that were started in the boom years?

Yes. Many of the projects broke ground in 2006-7 targetting completion anywhere 2008-12.

:

http://www.skyscrapernews.com/buildings.php?id=107

http://www.skyscrapernews.com/buildings.php?id=268

http://www.skyscrapernews.com/buildings.php?id=2068

http://www.skyscrapernews.com/buildings.php?id=5078

http://www.skyscrapernews.com/buildings.php?id=5077

http://www.skyscrapernews.com/buildings.php?id=108

http://www.skyscrapernews.com/buildings.php?id=975

:

... obviously the first two of these are further along than the others.

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