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Kyoto

What Has Happened To Your Rent Over The Last Decade?

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As per title really. There's been lots of interesting comments recently on how house prices have shot up, but rents have stagnated.

My experience confirms this. Between 2006 and 2009, I rented a bunch of 2 bedroom flats in the same postcode (Leeds). The prices were something like this:

2006 - 630

2008 - 600

2009 - 590

2010 - 600

They were all pretty comparable in size and quality. The area was in gentle decline. The last flat was arguably the best and could have been negotiated down to below the 09 price quite easily for a 'full house' of declines.

Sadly I'm about to get raped for £1400+ a month in London, so not feeling so smart today :(

Edited by Kyoto

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Below are the numbers up to 05 for the country as a whole. Bear in mind that the greatest rises will no doubt have occurred from 05 to 07. Not only have rents risen, they have risen as house prices have risen, unsurprisingly.

Rent index = average rent

Gross and net = yield

rents.jpg

Edited by tallguy

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Below are the numbers up to 05 for the country as a whole. Bear in mind that the greatest rises will no doubt have occurred from 05 to 07. Not only have rents risen, they have risen as house prices have risen, unsurprisingly.

Rent index = average rent

Gross and net = yield

rents.jpg

firstly, the rent index, as far as I know, isn't even mix adjusted, could well be a terrible statistic merely reflecting the fact that as the housing boom has taken hold there is a greater propensity for people to rent bigger houses instead of buying one; this certainly is not my experience of the cost of rents, albeit in my one small area, leeds. Not only that, but it does not appear to be inflation-adjusted, so just about looks like following inflaion for the period.

secondly, a 50% increase in the index from 1996 to 2005 (inflation)? compared to a 150% increase in mix-adjusted house prices and you say the following:

"Not only have rents risen, they have risen as house prices have risen, unsurprisingly."

you have precious little basis for that phrase.

Me: Leeds [all decentish LS6/LS4 areas),

2000: studio flat (unfurnished) £300 pcm

2003: small 2 bed flat w/balcony, unfurnished: £380 pcm (sublet spare room), rose with inflation to £415 pcm by the time I moved out

2007: small 3 bed terrace unfurnished, £510 pcm, still there same price. (this is cheaper than equivalent social housing)

I notice locally you can get a stuido flat, this time furnished, for £300 pcm. So no move, and quite possibly backwards, over 10 years

But I do realise that where I live on one of the ground zeros for uninformed out-of-town landlords saturating the market with rental properties, there is lots to choose from

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Bear in mind that the greatest rises will no doubt have occurred from 05 to 07.

what are you on? 'no doubt' - you mean in your dreams? rentright shows rents overall flat rents, with crude mix-adjustment, between 2006 and 2010.

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firstly, the rent index, as far as I know, isn't even mix adjusted, could well be a terrible statistic merely reflecting the fact that as the housing boom has taken hold there is a greater propensity for people to rent bigger houses instead of buying one; this certainly is not my experience of the cost of rents, albeit in my one small area, leeds. Not only that, but it does not appear to be inflation-adjusted, so just about looks like following inflaion for the period.

secondly, a 50% increase in the index from 1996 to 2005 (inflation)? compared to a 150% increase in mix-adjusted house prices and you say the following:

"Not only have rents risen, they have risen as house prices have risen, unsurprisingly."

you have precious little basis for that phrase.

Me: Leeds [all decentish LS6/LS4 areas),

2000: studio flat (unfurnished) £300 pcm

2003: small 2 bed flat w/balcony, unfurnished: £380 pcm (sublet spare room), rose with inflation to £415 pcm by the time I moved out

2007: small 3 bed terrace unfurnished, £510 pcm, still there same price. (this is cheaper than equivalent social housing)

I notice locally you can get a stuido flat, this time furnished, for £300 pcm. So no move, and quite possibly backwards, over 10 years

But I do realise that where I live on one of the ground zeros for uninformed out-of-town landlords saturating the market with rental properties, there is lots to choose from

Rents have risen as house prices have risen. However, the reason rents have risen more slowly is really quite simple if you actually think about at all.

A wall of cheap credit has been lent into existence.

This cheap credit has gravitated to houses because our economy has had nothing of any other substance to give that credit a home to go to. Consequently, prices have risen in response to elevated levels of credit. The initial reason why rents did not rise on a one-to-one basis with prices is because credit has been so cheap. Thus, with cheap credit, a house of 100k can conceivably cost no more to service in monthly mortgage payments them a house of half the price at twice the interest rate. Obviously, that is an extreme simplification for your benefit.

However, eventually prices have risen so steeply that, even with lowered interest rates, the cost of servicing a mortgage has steadily increased such that rents have been forced to increase as well in order to cover the mortgages of the landlords.

It's not complicated really....

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what are you on? 'no doubt' - you mean in your dreams? rentright shows rents overall flat rents, with crude mix-adjustment, between 2006 and 2010.

I'm on rentright right now.

Link to the specific page please?

Edited by tallguy

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Rent index = average rent

BS! Those figures are anything but average rent.

Here's the source for that - http://boards.fool.co.uk/historic-rental-yields-9757379.aspx

To obtain an index of rent paid, firstly the three available indices were normalised to be annual calendar year rents, indexed to 1995=100. For the York index market rent was used; for 2001 – 3 changes in Housing authority assured rent was used as a proxy for changes in market rent; for 1987-1989 fair rents performed a similar function. For the ODPM “All assured” tenancies were used, and a weighted average of the financial year figures was used to obtain calendar year averages. For RPI only an annual averaging of the monthly index level was required.

The ODPM was assumed to be the best rent index (since it most closely resembles a replacement good for owner occupied housing), the York index the next best (though less preferable when “market rent” was unavailable); and the RPI index the least preferable. Hence the following averaging weights were used:

Years York ODPM RPI

1987 – 1989 60% 0 40%

1990 – 1994 70% 0 30%

1995 – 2000 25% 60% 15%

2001 – 2003 20% 60% 20%

2004 0 70% 30%

2005 (3 quarters) 0 0 100%

0: indicates the index was not available in that year.

The composite index was constructed by taking the weighted geometric average of the changes to the indices in each year, and formulating a new index from the average change.

For years prior to 2004 the IPD index yield in 2001 was extrapolated backwards using the following formula: 2001 yield * (rent index in year Y / rent index in 2001) * (average quarterly ODPM house price in year 2001 / average House Price in year Y)

Since the seasonality component of the RPI (rents go up very strongly each april) is probably a result of “contamination” by annual public sector rent reviews, it is assumed that private sector rents actually change smoothly throughout the year. However house prices do not change smoothly throughout the year and it is the seasonality in these that creates seasonality in yields. So the following formula was used to calculate quarterly yields from annual yields. First calculate the average rent for the year in £ terms ; Yield for the year * House price for the year. Now interpolate the average rents between quarters. Now we have the average rent for each quarter we simply divide into the actual quarterly ODPM house prices for that quarter to get the quarterly yield.

Note that for the years 2001-2004 the composite rent index, and the average rent in that year, will be different as the composite rent index was not used to calculate the yields in these years – the “rent index” below is the indexed form of the average rent for the year NOT the composite rent index which is used only to extrapolate the yields prior to 2000 – and post 2004).

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I'm on rentright right now.

Link to the specific page please?

no, it's too simple to find, a little puzzle for you...

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They have had weightings applied to them in order to smooth out seasonal irregulatities.

Do you dispute the numbers? If so, on what basis do you dispute them other than the assertion they they are "bullsh*t"

non mix adjusted

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However, eventually prices have risen so steeply that, even with lowered interest rates, the cost of servicing a mortgage has steadily increased such that rents have been forced to increase as well in order to cover the mortgages of the landlords.

nonsense

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Hard to say since I've gradually moved into better places over the last 10 years. What I pay has roughly doubled, but then I've gone from a pokey, tatty little bedsit to a detatched 3-bed with a garage and a bit of garden. I would guess that what I've had to pay if I'd bought them would have more than doubled.

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Clearly HPI is another matter and despite what some people are hoping for re rents, I think many people seeming to be talking nonsense speculation about ‘apparent’ huge escalating rental levels in all areas (not talking about HB slums of course). OK, I only have knowledge about private rents in several London areas, where I and friends were tenants for a decade (and some of those still are renting).

But to be able to accurately assess the effects on HB changes on private rent levels (including HB subsidized rents, but NOT including council owned property) and possible further impact on ghettoization, I think it would help to get *accurate* real historic rent level data by property type, size, post code (even sub post code in London).

Historic wage levels of home owners/ tenants in postcode areas would also be helpful for further analysis.

Surely such arguments by politicians, media, web forummers etc regarding impacts on rents / ghetto effects should be based on FACT rather than assumption?

Or am I in the minority believing that the facts are important? Am I the only one who doesn’t think facts should NOT get in the way of a good debate?

Having said that I haven’t been able to find any accurate data. There however is some dubious ‘data’ I saw on the communities.gov website…

Perhaps accurate data simply does not exist, as everyone in the UK seems to be obsessed with property sales prices, and there is a wealth of accurate information available on each and every single property in the UK, whether that be a palace or a tiny studio flat.

But as far as historic rental data, I haven’t found much…..

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Rents have risen as house prices have risen. However, the reason rents have risen more slowly is really quite simple if you actually think about at all.

A wall of cheap credit has been lent into existence.

This cheap credit has gravitated to houses because our economy has had nothing of any other substance to give that credit a home to go to. Consequently, prices have risen in response to elevated levels of credit. The initial reason why rents did not rise on a one-to-one basis with prices is because credit has been so cheap. Thus, with cheap credit, a house of 100k can conceivably cost no more to service in monthly mortgage payments them a house of half the price at twice the interest rate. Obviously, that is an extreme simplification for your benefit.

However, eventually prices have risen so steeply that, even with lowered interest rates, the cost of servicing a mortgage has steadily increased such that rents have been forced to increase as well in order to cover the mortgages of the landlords.

It's not complicated really....

It doesn`t work like that, last landlord in has to charge more, then goes bust before 1st in.

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For those who recommended Rentright as a source of data. I had already seen that site a few days ago and it does ‘appear’ to have some historic data, yes, but have a look - it’s obviously nonsense

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Over the last decade, I've live in three different flats, and each move has given me more space for less rent. My rent has gone down significantly over the last decade. Being a rock-solid tenant has made in easy for me to get a good price, though.

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The depth of your argument is intellectually overwhelming..... :lol:

Is this your normal posting practice when confronted with facts?

It's a sensible response to someone posting nonsense like 'rents have been forced to increase'.

So what if your costs have increased? Renters don't give a shit about your costs, just what they're prepared to pay to rent from you. Landlords don't set the limit on rents, ultimately renters do... if landlords try to increase rents above what renters are prepared to pay, then the renters move elsewhere. Or are you really claiming that Britain's glorious BTL landlord brigade kept rents low out of the kindness of their hearts in the boom time when they could otherwise have charged much more?

Worse than that, in a recession you tend to find lots of people who need help with their mortgage start taking in lodgers, so while you're increasing your rents, there's a huge increase in rental capacity at the cheap end of the market.

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One bed flat in 2000 : £325 p/m

One bed flat in 2010 : £500 p/m

About the same quality. Same city, location is probably a bit better for the second.

Edited by EUBanana

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Slight rise over 10 years, probably about inflation.

I believe this is because salaries have remained stagnant also. Rent is affordability based, sale prices are availability of credit related. So these btl geniuses have seen their yields go through the floor in this period, hence only the really dim ones have entered the market in recent years.

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