Cost Of Rented Accommodation Falls

[fellow]

http://www.google.com/hostednews/ukpress/article/ALeqM5iCZS30OlErsFtCiqcddMubRFeIuw?docId=N0261201295521297044A

The cost of being a tenant fell for the first time in nearly a year in December but rents are expected to resume their upward march during 2011, research has indicated.

Average rents fell by 1.2% during the month, dropping to £684 from the record high it reached in November, according to lettings agent network LSL Property Services.

The groups said the fall, which was the first one since January last year, was driven by the fact that December is traditionally a slow month for the rental market, as well as the severe winter weather seen in the month.

It said landlords with properties which were vacant in December often cut their rents to avoid having a long void period during the festive season. A landlord who slashed the average UK rent by 5% to get a tenant in December would actually save £275 over a year, compared with if the property was vacant for one month.

But LSL expects rents, which are still 3.8% higher than they were a year ago, to begin rising again in the coming months as the mismatch between supply and demand reasserts itself.

David Newnes, estate agency managing director of LSL property services, said: "December is traditionally a slower month for the rental market.

"Many prospective tenants are either away from home or prioritise Christmas spending over budgeting to move. This year, the added Arctic weather temporarily dampened demand, deterring many renters from hitting the streets and viewing properties.

"Nevertheless, with the supply of mortgage finance to both first-time buyers and would-be landlords still constrained, we are likely to see rents restart their upwards march before the spring."

Wales saw the steepest fall in rents in December, with the cost of being a tenant dropping by 2.6%, while rents in the South East and London fell by 2.5% and 2.3% respectively.But not all areas of the country saw drops, with rents rising by 2.2% in the West Midlands and 1.7% in the South West, with smaller increases also recorded in the East Midlands and the North East.

I have noticed a large increase in rental supply in January, as people are realising that they aren't going to sell.

[Number79]

I have noticed a large increase in rental supply in January, as people are realising that they aren't going to sell.

...and it is being taken up by an increased number of people who are unwilling to buy. I dont see rents going down at all, if anything there is far more demand for rentals and prices are rising because of it. On the plus side it is because no one is buying so the hpc should be coming shortly.

[montesquieu]

http://www.google.com/hostednews/ukpress/article/ALeqM5iCZS30OlErsFtCiqcddMubRFeIuw?docId=N0261201295521297044A

I have noticed a large increase in rental supply in January, as people are realising that they aren't going to sell.

Correct according to my observation, landlady is selling up (=getting desperate, she's dropped £20k already and it's only a month), we are moving along the street, it's £100 more than we were paying, but with three extra rooms (an extra bedroom and a 2-bed granny flat - has 5 beds and 4 public). Was on three years ago at £500 more, but dropped when it came up last year and now they accepted our offer.

When we were looking I found tons more choice and better value than two years ago.

[fellow]

...and it is being taken up by an increased number of people who are unwilling to buy. I dont see rents going down at all, if anything there is far more demand for rentals and prices are rising because of it. On the plus side it is because no one is buying so the hpc should be coming shortly.

Surely the people unwilling to buy are already renting somewhere? Prices WERE rising because of a shortage of supply.

[plummet expert]

http://www.google.com/hostednews/ukpress/article/ALeqM5iCZS30OlErsFtCiqcddMubRFeIuw?docId=N0261201295521297044A

I have noticed a large increase in rental supply in January, as people are realising that they aren't going to sell.

At the end of the day, rents have hit the buffer. How much more can anyone pay for a flat? If people traded down from houses, then the saving party is over. Houses of 3 & 4 beds have actually had falling rents over the last year in this region - sussex. They are much better value for the space than any 2 bed flat!

[northwestsmith2]

At the end of the day, rents have hit the buffer. How much more can anyone pay for a flat? If people traded down from houses, then the saving party is over. Houses of 3 & 4 beds have actually had falling rents over the last year in this region - sussex. They are much better value for the space than any 2 bed flat!

If renters could leverage like buyers did we'd have a rent price boom, like with houses rising 20% in 12 months.

[fellow]

This article makes a very good point for landlords to consider. http://www.totallymoney.com/news/index.php/2011/01/average-uk-rent-falls/

“If a landlord cuts the rental price by 5% to fill a property immediately, he will save £275 over the year rather than seeing their property vacant for the duration of the month.”

[erranta]

...and it is being taken up by an increased number of people who are unwilling to buy. I dont see rents going down at all, if anything there is far more demand for rentals and prices are rising because of it. On the plus side it is because no one is buying so the hpc should be coming shortly.

Think again!

Those in the usual FTB status are moving back in/staying with with their relatives/parents as there are mostly only minimum wage jobs to choose from! Most companies have stopped hiring.

All we see is twisted(twigs) vi crap data in the media

Edited January 22, 2011 by erranta

[fellow]

Think again!

Those in the usual FTB status are moving back in/staying with with their relatives/parents as there are mostly only minimum wage jobs to choose from! Most companies have stopped hiring.

All we see is twisted(twigs) vi crap data in the media

And with record levels of youth unemployment there wont be much new blood on the market.

[mdman]

...and it is being taken up by an increased number of people who are unwilling to buy. I dont see rents going down at all, if anything there is far more demand for rentals and prices are rising because of it. On the plus side it is because no one is buying so the hpc should be coming shortly.

That demand is limited by affordability which will worsen as stagflation continues.

[porca misèria]

Average rents should rise during an HPC:

1. More people who can afford to buy choosing to rent and wait - demand for better rental properties.
   
2. More accidental landlords - supply of better rented properties.
   
3. Hence a rise in both supply and demand at the top end, and more of it in the mix.
   

If/when sentiment moves away from HPC, that should reverse quite rapidly as renting reverts to almost exclusively the poor and the slumlords.

[Georgia O'Keeffe]

Average rents should rise during an HPC:

1. More people who can afford to buy choosing to rent and wait - demand for better rental properties.

2. More accidental landlords - supply of better rented properties.

3. Hence a rise in both supply and demand at the top end, and more of it in the mix.

If/when sentiment moves away from HPC, that should reverse quite rapidly as renting reverts to almost exclusively the poor and the slumlords.

that fully depends on what type of HPC it is, whether it is a relative stand alone HPC or whether the HPC is simply a subset of wider economic reversal, you are therefore assuming a continuing trend of the last 40 years social conditions remaining in a bull market or at least unchanged whilst a potential HPC happens, it is just as likely for the social trend of reduced occupancy to reverse in line with house prices if it is more than just a HPC, the only thing that should happen is rent becomes relatively more expensive than houses at some stage, but theres no should when it comes to rents actually increasing, they are no more likely to rise than decline

Edited January 22, 2011 by Tamara De Lempicka

[Misanthrope]

That is the point. You can't leverage a rent. A rent is more closely linked to wages than borrowing capacity.

Exactly.

[BearlyBegun]

Think again!

Those in the usual FTB status are moving back in/staying with with their relatives/parents as there are mostly only minimum wage jobs to choose from! Most companies have stopped hiring.

All we see is twisted(twigs) vi crap data in the media

I agree, although all I have is anecdotal.

Almost all the people I work with who rent in london were already paying a high percentage of their wages on rent. Those that keep their jobs will have to downgrade again if rents climb, and for some they cant really downgrade much more!

With more people becoming unemployed, with more potential FTB who keep their jobs moving back home to cope & with everyone's disposable income being squeezed I just cant see rents in my area of west london going any higher.

[_w_]

...and it is being taken up by an increased number of people who are unwilling to buy. I dont see rents going down at all, if anything there is far more demand for rentals and prices are rising because of it. On the plus side it is because no one is buying so the hpc should be coming shortly.

Rents have been clearly falling in West London over the last couple of months. As the cost of voids will go up for the foreseeable future and families' housing budgets go steadily down I forecast that the downward trend won't stop for many years now.

[_w_]

Surely the people unwilling to buy are already renting somewhere? Prices WERE rising because of a shortage of supply.

There never was a shortage of supply, there was an excess of money making voids cheap.

[Stars]

That is the point. You can't leverage a rent. A rent is more closely linked to wages than borrowing capacity.

Landlord vested interests like to think of it in terms of supply and demand like houses - "more people but fewer properties = higher rents".

Cannot work entirely like that. Unlike the homeowning market, rentals cannot move away from the fundamentals of working people's incomes.

EDIT: (the evidence for this postion is all around us as yields against current property 'values' are so low)

The above is true, but rent can move upwards to take more of what is available. It can't take more than the total surplus available, but if some factor holding it lower than this level is removed, then it can rise to take more of that surplus. Imo the ease of lending has dampened rents in recent history. This could end if lending tightens. However at the same time, if incomes are falling this puts a downward pressure on the total surplus rent can draw from. If i were going to guess which way it will go, I would say we will see a situation in which rents fall a bit but at the same time they become more difficult to pay.

Edited January 22, 2011 by Stars

[_w_]

The above is true, but rent can move upwards to take more of what is available. It can't take more than the total surplus available, but if some factor holding it lower than this level is removed, then it can rise to take more of that surplus. Imo the ease of lending has dampened rents in recent history. This could end if lending tightens. However at the same time, if incomes are falling this puts a downward pressure on the total surplus rent can draw from. If i were going to guess which way it will go, I would say we will see a situation in which rents fall a bit but at the same time they become more difficult to pay.

Rents are competing with the quickly rising cost of food, transport, health, education and taxes. Add to that the unavailability of credit that boosted spending and people's growing realisation that they desperately need to save. No contest; it should be as close as it gets to a bloodbath.

[Stars]

Rents are competing with the quickly rising cost of food, transport, health, education and taxes. Add to that the unavailability of credit that boosted spending and people's growing realisation that they desperately need to save. No contest; it should be as close as it gets to a bloodbath.

Rent is the first cost paid, because without paying rent you have nowhere to eat and no place to transport yourself to, so rent can rise and will be paid until the choice becomes either pay rent or not have enough food to make it to the future. Your point about taxation is perfectly valid though; taxation is a form of rent - or more accurately, rent is a form of taxation; so even with our topsy turvy tax system they do manage to discount each other to some degree

To take one of your examples to show how this is more complex than you are painting it:

If transport costs rise, the advantage of being near where you need to travel to rises. This advantage translates to an increased rent for being there and having access to that advantage.

[_w_]

Rent is the first cost paid, because without paying rent you have nowhere to eat and no place to transport yourself to, so rent can rise and will be paid until the choice becomes either pay rent or not have enough food to make it to the future. Your point about taxation is perfectly valid though; taxation is a form of rent - or more accurately, rent is a form of taxation; so even with our topsy turvy tax system they do manage to discount each other to some degree

To take one of your examples to show how this is more complex than you are painting it:

If transport costs rise, the advantage of being near where you need to travel to rises. This advantage translates to an increased rent for being there and having access to that advantage.

It is that simple from where I sit. There is a surplus of properties in West London, lots of empties and much room for people to save on housing by sharing, downsizing, subletting, etc or simply staying with mum and Dad or the wife/husband when divorce and separation would have the easier solution in the past. Looking at the supply side what I see are landlords whose cost of voids was very low or more likely negative taking HPI into consideration. That _has_ changed, it is udeniable. The lack of HPI has made the cost of holding property positive again (maintenance, taxes and rising interest rates), voids are now turning into financially painful situations to be avoided rather than ignored while fishing for the next irresponsible tenant.

So what do I see?

On the demand side:

- LOTS of potential and _need_ for reductions in demand for property when faced with non reducible and increasing costs

On the supply side:

- Over supply

- The cost of resisting the market's supply demand pressures is now making itself felt thus encouraging landlords to 'go with the market' and meet demand with price reductions.

I only say this partially in jest: it's a no brainer!

[_w_]

It is that simple from where I sit. There is a surplus of properties in West London, lots of empties and much room for people to save on housing by sharing, downsizing, subletting, etc or simply staying with mum and Dad or the wife/husband when divorce and separation would have the easier solution in the past. Looking at the supply side what I see are landlords whose cost of voids was very low or more likely negative taking HPI into consideration. That _has_ changed, it is udeniable. The lack of HPI has made the cost of holding property positive again (maintenance, taxes and rising interest rates), voids are now turning into financially painful situations to be avoided rather than ignored while fishing for the next irresponsible tenant.

So what do I see?

On the demand side:

- LOTS of potential and _need_ for reductions in demand for property when faced with non reducible and increasing costs

On the supply side:

- Over supply

- The cost of resisting the market's supply demand pressures is now making itself felt thus encouraging landlords to 'go with the market' and meet demand with price reductions.

I only say this partially in jest: it's a no brainer!

Just wanted to add: two things have made the rental market fundamentally different to what it was before:

- the ponzi economy of the last 15 years that allowed price inflation to be treated as income has ended.

- there is no more HPI.

That is enough for property owners to stop using property as a form of currency and turn it into an income generating asset. It's a complete turnaround of the market.