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Renting. Is It Prolonging The Agony?

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I expect this has been covered before, but I can't help but think that all these clued-up types STRing, and forced renters are actually propping up the BTL market.

After all, it seems most BTLs are in it for the long term. They're not overly interested in yield income, but more in the capital gain as a replacement for the traditional pension. They're not looking to release any profit until they retire, many years hence.

It would of course only be viable if this method out performed traditional pensions savings. And that is just what a lot of people are banking on. If the market for renting is there, as it must be because so many can't afford to buy, then why shouldn't it continue?

I've said it before, BTLs have replaced FTBs. Could it be permanent? BTLs normally have more buying power don't they? So can they not sustain higher prices?

Lets say we have a big crash now. Providing a BTL can maintain mortgage payments and other costs, surely the property is more than likely to be worth more in say 35 years, than they paid for it now, even at the peak of the market?

Providing rents stay relatively high (as i believe they are historically), then the burden of cost ought to be manageable over the long term?

Of course, if the stock market gets on a roll again, the whole BTL scene would become a liability, and traditional pensions would become more attractive once again.

Just my thoughts, feel free to disagree, i'm happy to be shown the error of my ways :D

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BTLs haven't been buying for rental yields, they've been buying for price inflation. Currently rental yields are below deposit account returns and prices are deflating.

Why would any sane person get into BTL now? Smart people would be getting out.

Providing a BTL can maintain mortgage payments and other costs

How are they going to do that, with typical rental yields around 2-3% by my calculations?

Personally I'm real glad my landlord is willing to take a big hit in the crash rather than sell out. I really don't want to have to move any time soon.

Edited by MarkG

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There are two ways to make a profit on BTL:

1) Rental yield.

2) Capital gain.

Neither are working at the moment. However it is true that a BTL who bought before the massive rises will be able to afford to keep the property as long as they get enough rent to partially or completely cover the rent.

However I'm not bothered about the majority of BTL. To be honest I may even get one myself when prices drop. But what I am interested in is the housing market in general. BTL have caused the massive rises but it only takes a small number of BTL, along with an absence of FTB, to cause prices to fall (as DR B always says it's the margins that determine the market).

So innevitably a small number of BTL will get into trouble and either have to sell or will be reposessed. This is why I believe that the market will be forced down through a series of gradual drops.

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There is a different view held by many who are neither sheeple or the herd.

The view is to buy into a scarce resource that can only become scarcer at any cost.

Its predictive investment is well noted in the fields of Gold, Oil, and yes of course Property.

I think the dynamics are changing, it appears that the divisions of wealth under labour have actually been moved.

However the underclass remains with more joining each day, the Aristocracy have been toppled that was the intention, however they are now replaced with the Totalitarian Socialists who will come to dominate the fields of wealth.

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I can't help but think that all these clued-up types STRing, and forced renters are actually propping up the BTL market.

An interesting point, but I dont think it works like that.

Most STRs will have substantial equity and will be renting medium to large houses whereas the BTL brigade will be buying the cheaper stuff.

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yes of course Property.

Now you just need to explain how housing is "a scarce resource that can only become scarcer at any cost", and how house prices can be at record levels when there are record numbers of houses and flats for sale.

And, for that matter, why in this world of ever-scarcer property, rents haven't tripled while house prices have?

Ah, because it's a pure speculative bubble with no basis in legitimate supply and demand.

Edited by MarkG

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According to Dr Bubb's demographics chart for the UK, anyone who's 50 is going to find it easy sell a house because there's a big fat glut of 40 year old buyers on the ladder rung below.

But... the 40 year olds are stuffed because there's notably fewer 30 year olds in comparison to buy their houses. Younger than 30, the demographics get worse.

Don't make assumptions about the value of your house in 30+ years time. Today's 40 year olds will be in their rocking chairs, leaving behind them a glut of empty 3 beds suitable for families with young children right next to schools and shops.

The lesson that the 20-30 year olds need to learn from this is this: Better get down to having a whole lot of sex right now: Your future house price NEEDS YOU!!!

:P

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According to Dr Bubb's demographics chart for the UK, anyone who's 50 is going to find it easy sell a house because there's a big fat glut of 40 year old buyers on the ladder rung below.

But... the 40 year olds are stuffed because there's notably fewer 30 year olds in comparison to buy their houses. Younger than 30, the demographics get worse.

Don't make assumptions about the value of your house in 30+ years time. Today's 40 year olds will be in their rocking chairs, leaving behind them a glut of empty 3 beds suitable for families with young children right next to schools and shops.

The lesson that the 20-30 year olds need to learn from this is this: Better get down to having a whole lot of sex right now: Your future house price NEEDS YOU!!!

:P

Along the same lines, notice in the bubbmeister's demo graph a big spike at just under 60. That's the baby boomers. A lot of who have BTLs, and a lot of who are about to retire over the next 5-10 years, turning their properties into cash...

frugalista

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I think people need to remember that not all BTLers are going to be forced to sell if prices fall/interest rates rise/rents fall. Many sensible BTLers have figured at least a 30% correction in the market value/rents etc. Its just a blip that needs to be suffered.

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Many sensible BTLers have figured at least a 30% correction in the market value/rents etc.

Are you sure you're not a BTLer? Otherwise how would you know this?

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There is a different view held by many who are neither sheeple or the herd.

The view is to buy into a scarce resource that can only become scarcer at any cost.

Its predictive investment is well noted in the fields of Gold, Oil, and yes of course Property.

I think the dynamics are changing, it appears that the divisions of wealth under labour have actually been moved.

However the underclass remains with more joining each day, the Aristocracy have been toppled that was the intention, however they are now replaced with the Totalitarian Socialists who will come to dominate the fields of wealth.

oh dear laurejon!!!...you really have got it horribly wrong!!

the dynamics of UK property are changing!,who on earth told you that people would CONTINUE to be in single domiciles?,don't you think one a few/lot of them get in trouble this time they will start to consider house-share arrangements?

...also,10 years from now the baby-boomers will be retiring/dying en masse,what kind of impact do you think that is going to have???

...Dr Bubb is absolutely correct in saying this phenomenon is rather unlikely next time around,the demographics just don't tally......I might be going long on pharma's+ care-homes in a few years though

...or maybe you are pinning your hopes on massive global warming+coastal erosion to come to your rescue!

Edited by oracle

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I think people need to remember that not all BTLers are going to be forced to sell if prices fall/interest rates rise/rents fall.  Many sensible BTLers have figured at least a 30% correction in the market value/rents etc. Its just a blip that needs to be suffered.

True, I don't believe it will stop the HPC though. There are many sensible investors that have ridden the stock market crash out.

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One of the problems of BTL investors in the market compared to FTB's is that BTL do not trade up to a better bigger house (they may buy another FTB type house) so if you have a house that is aimed at a second time buyer you wont have anyone to sell to as these people could not gain a hold at the bottom of the ladder.

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true,not all of them will be forced to sell,but just as the stock market...the ones that do will be the ones that got in late to the party(and that's a lot of people!!!)

consider this,only about 20% of the working population directly own shares(if you include endowments,ISA'S and funds)

something like 70% of the working population own(or mortgage)property...so the property rises/falls hit home with a LOT more people,causing them to spend/save

accordingly.

you thought dotcom was a bad crash???....think again!

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True, I don't believe it will stop the HPC though.  There are many sensible investors that  have ridden the stock market crash out.

Agreed. All the guys I know who suffered in the last HPC managed to hang on to 75% of their stock and then made even more money this boom. The point I'm trying to make is that if people think that 90% of landlords will just fold and disappear when the HPC happens they are mistaken. They will make adjustments/economies and hold onto the majority of their stock as tenants will always need places to rent

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Agreed. All the guys I know who suffered in the last HPC managed to hang on to 75% of their stock and then made even more money this boom. The point I'm trying to make is that if people think that 90% of landlords will just fold and disappear when the HPC happens they are mistaken. They will make adjustments/economies and hold onto the majority of their stock as tenants will always need places to rent

....again this is true,but if psychology changes and people do consider co-habitation arrangements,that will leave a lot of today's BTL with 1/2 bed shoeboxes they can't fill.

pound for pound,house share is more cost-effective(if slightly less convenient)

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OK here is my 2 pence worth!

Generally the rental market is much more liquid and efficient than the homeowner market.

One of the reasons is that when you rent, you buy a property that meets your needs. When you buy, you buy as big a place as you can possibly get, even if it is far bigger than necessary, in the hope of future growth. If rents go up, people are more flexible in terms of making changes to keep the costs under control.

There may be a small increase in rents during the crash (although there is absolutely no evidence of rents increasing yet), but it will be small - a few percent at most.

The swings in the owner market will be BIG.

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One of the reasons is that when you rent, you buy a property that meets your needs.  When you buy, you buy as big a place as you can possibly get, even if it is far bigger than necessary, in the hope of future growth.  If rents go up, people are more flexible in terms of making changes to keep the costs under control.

I will go with that. Me and my girlfriend are looking to share a 2 bedroom place with another couple. This will work out about £175pcm rent each. Its the only way we can hope to save any money. When we/she buys it is more likely to be a three bedroom semi in a nicer area.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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