Rents Outpace House Prices Due To Demand

[waitandsee]

Interesting article

http://news.ft.com/cms/s/930e16d2-1be7-11d...000e2511c8.html

Rents have risen faster than house prices for the first time in nine years, underpinned by sturdy demand, according to an analysis by the Financial Times.

In a survey to be published today, the Royal Institution of Chartered Surveyors said rents rose at the fastest rate in four years in the three months to July. It said the demand came primarily from those who could not afford to buy, despite the sharp slowdown in house price inflation over the past year and last month's quarter-point cut in interest rates.

Jeremy Leaf of Rics, said: "August's interest rate cut is unlikely to reduce tenant demand as tough affordability means renting remains the only realistic option for many." Almost two-thirds of tenants are under 35 years old and one-quarter are under 25 years.

Rents have risen by 3.8 per cent in the 12 months to July, according to the Office for National Statistics, while annual house price inflation fell to 2.6 per cent in July and to 2.3 per cent in August, according to Nationwide, the largest building society. The ONS rent measure includes local authority rents as well as private rental accommodation.

Of the surveyors polled by Rics, 29 per cent said rents had risen over the past quarter against 61 per cent who said they had stagnated and 10 per cent reported falling rents. On balance 19 per cent reported an increase was the highest in four years.

However Rics also reported a fall in surveyors' expectations for rental rises - other than in London and the south west - partly because of an increase in supply. Rics said more buy-to-let investors were entering the market and that landlords were exiting the market at half the rate of this time last year.

"The return of buy-to-let investors is a result of expectations that interest rates have peaked," said Mr Leaf. "They may also have been encouraged by the fact that the housing market, though subdued, has not collapsed, despite widespread fears that it would do so."

Milan Khatri, Rics economist, said there was a perception that house prices may fall, which could cause some prospective buyers to calculate that it would be cheaper to rent.

People expect a continued, but controlled slowdown in house prices, with falls of up to 5 per cent by June, according to IG Index, the spread betting firm.

Francis Brown of Richmond-based Norman Brown letting agents in Yorkshire and Humberside told the Rics survey: "With house prices no longer rising for the time being, confidence is coming out of the property ladder and renting before going back in is greater."

[Waiting Patiently]

I doubt that many landlords can get away with actually raising their rents at the moment. Even with extra renters entering the market there seems to be a surfeit of rental properties in many areas.

Rental yields are a percentage of a properties value so as house prices fall rental yield rises commensurately.

[homeless]

exactly

rents aint rising at all, infact there dropping slightly.

its the property value thats falling making the yield look slightly improved.

[eric pebble]

I doubt that many landlords can get away with actually raising their rents at the moment. Even with extra renters entering the market there seems to be a surfeit of rental properties in many areas.

Rental yields are a percentage of a properties value so as house prices fall rental yield rises commensurately.

<{POST_SNAPBACK}>

I have never seen so many properties for rent - right across southern UK - I travel SW to SE every 2-3 weeks - and look at local press - and there have NEVER been so many places for rent - people are desperate to rent out their 2nd/3rd homes!! It has never been better for renters -- you just offer them 60-80 of what they're asking - and if they say no, just move on!!!

The media spin about rent rises is just another piece of b$$sh%t spin by the VI's trying desperately to talk up the market however they can...... ALl you people out there - JUST OFFER THEM HALF - ALL OF YOU!!!!!!!!!

[Faithman]

They should be. When my parents started out rent was a relatively small bill.

Which idiots are paying all these high rents. Can you believe that some people might ever pay a third of their income on rent - unbelievable!!

[eric pebble]

They should be. When my parents started out rent was a relatively small bill.

Which idiots are paying all these high rents. Can you believe that some people might ever pay a third of their income on rent - unbelievable!!

<{POST_SNAPBACK}>

Agree - but it's usually at least half of i/c these days....... But you can beat the price down -- there are SO many places up for rent all over the hops these days...... just offer them half!!

[bobdabuilder]

Agree - but it's usually at least half of i/c these days....... But you can beat the price down -- there are SO many places up for rent all over the hops these days...... just offer them half!!

<{POST_SNAPBACK}>

Hold on a minute. If renters are knocking down the rent and buyers are asking for discounts on the asking price, what does that mean for the housing market in general?

Falling house prices + falling rental income means BTL selling up to find more attractive investments which means less properties to rent, rents go back up, houses become a better investment, property prices go back up.

:angry:

[HenryWeston]

I have never seen so many properties for rent - right across southern UK - I travel SW to SE every 2-3 weeks - and look at local press - and there have NEVER been so many places for rent - people are desperate to rent out their 2nd/3rd homes!! It has never been better for renters -- you just offer them 60-80 of what they're asking - and if they say no, just move on!!!

The media spin about rent rises is just another piece of b$$sh%t spin by the VI's trying desperately to talk up the market however they can...... ALl you people out there - JUST OFFER THEM HALF - ALL OF YOU!!!!!!!!!

<{POST_SNAPBACK}>

Its the same here in hereford, loads and loads of property for rent, the same old places advertised for months, the rents they are asking is dropping

[VacantPossession]

Rents MIGHT have risen UP to last July or August, but the RELEVANT fact, one which RICS quite deliberately avoids, is what's happening to them since mid year, and they are quite evidently FALLING, not rising.

VI spin is getting ever more focussed away from current circumstances and ever more towards outdated and over-long statistical periods, and the reason is obvious. The further back you go the better for the VI's the figures look. Don't be duped!

VP

Edited September 5, 2005 by VacantPossession

[London-loser]

Looking at those details...

RICS says:

61% of surveyors have seen rents stagnant

10% have seen rents fall

(so 71% have seen flat or falling rents)

and

29% have seen rents rise

And the ODPM says rents have risen on average by 3.8% (a little bit behind the UK's average wage growth for the period).

Given surveyors are generally regional creatures, doesn't this suggest there are perhaps SOME areas with decent rental growth but on the whole there is very little here for the average BTLer to take comfort from?