Interesting Letter In The Independent Newspaper Today...

[MattW]

Rent Demand

" Excessive rents are damaging the economy and doing nobody, including buy-to-let investors, much good. If those who currently rent privately owned their property they would be spending around 60% of their take-home pay on the high street.

If renting takes up say 50% of pay, and the need to save for a deposit takes up 20%, that leaves 0% to spend on the high street, after food and bills. Multiply that by the vast numbers of currently renting and you have a key reason why the British economy is broken."

JM

Northampton

I wholeheartedly agree.

[Odysseus]

Rent Demand

" Excessive rents are damaging the economy and doing nobody, including buy-to-let investors, much good. If those who currently rent privately owned their property they would be spending around 60% of their take-home pay on the high street.

If renting takes up say 50% of pay, and the need to save for a deposit takes up 20%, that leaves 0% to spend on the high street, after food and bills. Multiply that by the vast numbers of currently renting and you have a key reason why the British economy is broken."

JM

Northampton

I wholeheartedly agree.

Replace the word rent with house prices and you're almost there.

[200p]

Those receiving the rent aren't spending it on the High street - they are buying up more properties and the vicious cycle continues.

[Longtermrenter]

I keep meaning to put a standard letter together do each time I get a leaflet through the door about garden/kitchen/other home improvements I fan reply thus:

Dear business owner, this property is rented out and therefore it is highly unlikely any of your products will be purchased at this property due to high rents but also because renters are averse to loading up with unnecessary things that might not fit/suit their next rental property. If any white goods or carpets are going to be bought by the landlord they will be the cheapest economy versions. I hope things pick up to the point where as a consumer I can take part in the area of society your products ate directed towards.

[eric pebble]

Rent Demand

" Excessive rents are damaging the economy and doing nobody, including buy-to-let investors, much good. If those who currently rent privately owned their property they would be spending around 60% of their take-home pay on the high street.

If renting takes up say 50% of pay, and the need to save for a deposit takes up 20%, that leaves 0% to spend on the high street, after food and bills. Multiply that by the vast numbers of currently renting and you have a key reason why the British economy is broken."

JM

Northampton

I wholeheartedly agree.

It's one of the greatest scandals of our times..... Sits like a big fat Elephant in the Room...... everyone pretending it isn't there...

[dances with sheeple]

Rent Demand

" Excessive rents are damaging the economy and doing nobody, including buy-to-let investors, much good. If those who currently rent privately owned their property they would be spending around 60% of their take-home pay on the high street.

If renting takes up say 50% of pay, and the need to save for a deposit takes up 20%, that leaves 0% to spend on the high street, after food and bills. Multiply that by the vast numbers of currently renting and you have a key reason why the British economy is broken."

JM

Northampton

I wholeheartedly agree.

Well I wouldn`t be but the thought is along the correct lines.The economy is also broken because we don`t make much now, we pay people too much not to work, and we relied on banking as our main "industry"?. Eventually house prices and living standards will drop.

Edited March 1, 2013 by dances with sheeple

[pjw]

Replace the word rent with house prices and you're almost there.

yes - and of course high rents are a reflection of high house prices. Introduce an LVT and restrict mortgages by law to 3 times one person's salary (with zero for any spouse's salary) and both house prices and rents would come down, and we would stop distorting the economy into a vehicle purely for the financial services industry and start living real lives.

[inflating]

It's one of the greatest scandals of our times..... Sits like a big fat Elephant in the Room...... everyone pretending it isn't there...

Not just in the UK.

In many Polish cities, you'll find shopping malls that dwarf the likes of Brent Cross and are far more upmarket, yet are packed with shoppers getting their designer clobber and electronics. YET...

Polish apartment city rents are EXPENSIVE compared to WAGES. A wage is typically 650 quid NET a month at best, but a 1-bed apartment's rent will set you back at least GBP280 and that's before paying service charges of another eighty to a hundred and fifty quid at least each month. A better street or private estate will demand more like GBP350 in rent each month plus even higher service charges. Plus elctricity and gas by metering (it ain't given away, prices are almost as high as Britain's) plus metered water plus internet/cable TV and plus of course food! And the price of food in Poland is not cheap, only potatoes, bread and vodka are on the cheap side. The rest of it you pay a lot v wage income for. For example, a box of quality tea bags (100) GBP3, jar of Nescafe coffee GBP4 (these are hypermarket discount prices, not local store prices which are 10% more at least). Petrol is about 10% cheaper than the UK. But the rest of it is pretty pricey versus salaries and yet Poles have to manage on that, and the shops are still full of shoppers and the roads have more expensive cars and SUVs on them than I see on my visits to better parts of Essex or North London.

Go figure!

By the way, there are so many new flats being built everywhere you look, and yet rents are high and vendors' prices are high.

I'm not talking Warsaw, I'm talking the Polish versions of Bristol, Cambridge, Sheffield, etc. Sky high rents, x8 single income flat prices, food prices almost the same expensive level as Britain's (except for some staples) and yet busy busy busy shops and roads.

The Poles manage on very little disposable income each month after paying rent and other bills -- I don't understand why Britons won't have to do the same and have to lump it, unfortunately. It's been going on like this in Poland apparently for some years now, one of the reasons so many migrated away.

[cashinmattress]

A lot 'landlords' and especially the 'unplannedlords' are not paying their taxes accordingly, and, the government is not checking up.

BTL and letting is defined as a business, yet, there is no way SME's outwith property letting could operate so exclusively outside of the trading standards as does letting.

Yet, with all the politicians having a hand in it, we know that turkeys don't vote for Christmas.

All that will happen is that people will go into rent arrears, leaving the onus on the letting agent / landlord to pursue them in court whilst taking the hit.

Actually, most amateur landlords I know would be wholly wiped out if their tenant refused to pay for just three months; they are that saddled with liabilities.

Edited March 1, 2013 by cashinmattress

[inflating]

All that will happen is that people will go into rent arrears, leaving the onus on the letting agent / landlord to pursue them in court whilst taking the hit.

You're joking right?

Landlords will probably get the benefit of some new taxpayer/saver paid for scheme, probably another FFL (Funding For Landlords)

Anything to keep the ponzi going

[cashinmattress]

You're joking right?

Landlords will probably get the benefit of some new taxpayer/saver paid for scheme, probably another FFL (Funding For Landlords)

Anything to keep the ponzi going

No joking.

And I doubt it.

The government has been offloading social housing for the past few decades, to near extinction, for a reason.

Nil liability.

Banks have already set up their perpetual bailout scheme because they have a lot of clout.

Landlords have very little pull in that regards, especially ones that didn't go to Eton.

[goldbug9999]

Introduce an LVT and restrict mortgages by law to 3 times one person's salary (with zero for any spouse's salary)

Direct egulation isnt the answer IMO. Better to create market conditions that make lenders more cautious e.g. make all secured loans non-recourse upon surrender of the asset, treat home equity as "savings" for the purpose of benefit means testing etc.

[goldbug9999]

A lot 'landlords' and especially the 'unplannedlords' are not paying their taxes accordingly, and, the government is not checking up.

BTL and letting is defined as a business, yet, there is no way SME's outwith property letting could operate so exclusively outside of the trading standards as does letting.

Yet, with all the politicians having a hand in it, we know that turkeys don't vote for Christmas.

All that will happen is that people will go into rent arrears, leaving the onus on the letting agent / landlord to pursue them in court whilst taking the hit.

Actually, most amateur landlords I know would be wholly wiped out if their tenant refused to pay for just three months; they are that saddled with liabilities.

I knew a BTLer was one void month away from the banks calling in the receiver. She had almost no equity in the BTL and was living in a rental herself because she didnt earn enough to get a get a residential mortgage on the house that was her BTL .

[Bloo Loo]

Not just in the UK.

In many Polish cities, you'll find shopping malls that dwarf the likes of Brent Cross and are far more upmarket, yet are packed with shoppers getting their designer clobber and electronics. YET...

Polish apartment city rents are EXPENSIVE compared to WAGES. A wage is typically 650 quid NET a month at best, but a 1-bed apartment's rent will set you back at least GBP280 and that's before paying service charges of another eighty to a hundred and fifty quid at least each month. A better street or private estate will demand more like GBP350 in rent each month plus even higher service charges. Plus elctricity and gas by metering (it ain't given away, prices are almost as high as Britain's) plus metered water plus internet/cable TV and plus of course food! And the price of food in Poland is not cheap, only potatoes, bread and vodka are on the cheap side. The rest of it you pay a lot v wage income for. For example, a box of quality tea bags (100) GBP3, jar of Nescafe coffee GBP4 (these are hypermarket discount prices, not local store prices which are 10% more at least). Petrol is about 10% cheaper than the UK. But the rest of it is pretty pricey versus salaries and yet Poles have to manage on that, and the shops are still full of shoppers and the roads have more expensive cars and SUVs on them than I see on my visits to better parts of Essex or North London.

Go figure!

By the way, there are so many new flats being built everywhere you look, and yet rents are high and vendors' prices are high.

I'm not talking Warsaw, I'm talking the Polish versions of Bristol, Cambridge, Sheffield, etc. Sky high rents, x8 single income flat prices, food prices almost the same expensive level as Britain's (except for some staples) and yet busy busy busy shops and roads.

The Poles manage on very little disposable income each month after paying rent and other bills -- I don't understand why Britons won't have to do the same and have to lump it, unfortunately. It's been going on like this in Poland apparently for some years now, one of the reasons so many migrated away.

It doesnt take many 1%ers to fill up a posh mall.

[cashinmattress]

I knew a BTLer was one void month away from the banks calling in the receiver. She had almost no equity in the BTL and was living in a rental herself because she didnt earn enough to get a get a residential mortgage on the house that was her BTL .

She sounds like an atypical British born and bred Krusty adoring moron.

[FreeFall]

The government has been offloading social housing for the past few decades, to near extinction, for a reason.

This is what I keep coming back to as well. My gut instinct is that we're all in for a fall no matter how well we prepare. House prices wil drop but standard of living will also drop when cost of living continues to fly - we'll all be whole lot worse off in general. Don't know how long it will take though - but I think it's a question of when, not if....

[rantnrave]

...

Polish apartment city rents are EXPENSIVE compared to WAGES.

...

Further proof, as if it were needed, that the price of property is much more connected to the amount of credit than simple supply and demand. If Poles up sticks en masse and come to the UK, you might expect house prices here to rise with the increased population, but to fall over there. The fact that both are rising suggests another factor (ie, higher lending multiples) is the real cause of the affordability problem.

[dances with sheeple]

Further proof, as if it were needed, that the price of property is much more connected to the amount of credit than simple supply and demand. If Poles up sticks en masse and come to the UK, you might expect house prices here to rise with the increased population, but to fall over there. The fact that both are rising suggests another factor (ie, higher lending multiples) is the real cause of the affordability problem.

? I don`t think they are rising over here outwith the noisy stats where the ten houses sold in a month push things up a bit, and then get adjusted down later?

[inflating]

Further proof, as if it were needed, that the price of property is much more connected to the amount of credit than simple supply and demand. If Poles up sticks en masse and come to the UK, you might expect house prices here to rise with the increased population, but to fall over there. The fact that both are rising suggests another factor (ie, higher lending multiples) is the real cause of the affordability problem.

Absolutely, and the ads for payday loans here are pushed at bus stops, on posters on street furniture, etc. Plus banks have people outside giving out leaflets (some of them dressed in cuddly costumes) to try to tempt people into taking out a loan. Stores that serve customers looking to make home improvements also lure people in -- the average Polish bedroom or living room is very much a designer affair (with the exception of the oldies who still live with very old furnishings a lot of the time). The showrooms sell a whole room to customers - a whole look - and it's very much smarter than what you see on average in the UK and it costs a packet. Yet sufficient Poles seem flush enough to patronize huge retail parks with a variety of such outlets. And the rest just borrow borrow borrow.

[RichB]

Not just in the UK.

In many Polish cities, you'll find shopping malls that dwarf the likes of Brent Cross and are far more upmarket, yet are packed with shoppers getting their designer clobber and electronics. YET...

Polish apartment city rents are EXPENSIVE compared to WAGES. A wage is typically 650 quid NET a month at best, but a 1-bed apartment's rent will set you back at least GBP280 and that's before paying service charges of another eighty to a hundred and fifty quid at least each month. A better street or private estate will demand more like GBP350 in rent each month plus even higher service charges. Plus elctricity and gas by metering (it ain't given away, prices are almost as high as Britain's) plus metered water plus internet/cable TV and plus of course food! And the price of food in Poland is not cheap, only potatoes, bread and vodka are on the cheap side. The rest of it you pay a lot v wage income for. For example, a box of quality tea bags (100) GBP3, jar of Nescafe coffee GBP4 (these are hypermarket discount prices, not local store prices which are 10% more at least). Petrol is about 10% cheaper than the UK. But the rest of it is pretty pricey versus salaries and yet Poles have to manage on that, and the shops are still full of shoppers and the roads have more expensive cars and SUVs on them than I see on my visits to better parts of Essex or North London.

Go figure!

By the way, there are so many new flats being built everywhere you look, and yet rents are high and vendors' prices are high.

I'm not talking Warsaw, I'm talking the Polish versions of Bristol, Cambridge, Sheffield, etc. Sky high rents, x8 single income flat prices, food prices almost the same expensive level as Britain's (except for some staples) and yet busy busy busy shops and roads.

The Poles manage on very little disposable income each month after paying rent and other bills -- I don't understand why Britons won't have to do the same and have to lump it, unfortunately. It's been going on like this in Poland apparently for some years now, one of the reasons so many migrated away.

Consumption fatigue. Give it a couple more years and it will kick in there too.

[MongerOfDoom]

I wholeheartedly agree.

Unfortunately, it's a load of steaming excrement.

The money paid in rent is either saved or spent by its recipient. So it either goes into the economy directly, or is available for someone else to borrow and then spend. It does not matter if income derived from housing is used to pay down debt (just another form of saving), or invest in more property (previous owner will need to spend it, or pay workers who built it, etc).

You may remember we had a boom in housing investment at the same time as a consumer boom not that long ago. Clearly, you would not expect that if money spent on housing somehow disappeared from the economy.

The only effect high rents have is that the economy needs to rebalance to produce things that property owners want, rather than whatever the renting populace would buy if they had any money left.

[lulu]

I keep meaning to put a standard letter together do each time I get a leaflet through the door about garden/kitchen/other home improvements I fan reply thus:

Dear business owner, this property is rented out and therefore it is highly unlikely any of your products will be purchased at this property due to high rents but also because renters are averse to loading up with unnecessary things that might not fit/suit their next rental property. If any white goods or carpets are going to be bought by the landlord they will be the cheapest economy versions. I hope things pick up to the point where as a consumer I can take part in the area of society your products ate directed towards.

I think this is a point missed by the MSM.

Personally I have experienced this, I bought a house last summer and have had to buy several things - from carpets, a new bed, washing machine, vacuum cleaner and a new kitchen is a long term project.

In my experience from renting, anything that was ever replaced/provided was the cheapest option available.

A LL will only ever really have an interest in providing the cheapest they can get away with. An OO on the other hand will potentially buy things of at least marginally better quality - thus providing a boost to retailers - surely?

I just bought a vacuum cleaner for example, it cost me £90, when renting, a 'new' vacuum cleaner was provided obviously from some second hand/charity place. It did not work particularly well - but the LL did not give a toss (and why would they?)

Same with beds, I lived for many years with beds that were not really fit for use any more, I could not get my own as the bed provided by the LL was on the inventory and could not be got rid of - now I have my own place I was able to go to the high street and buy a decent one (well the mattress anyway). Most renters are simply not in a position to do this and surely retailers are suffering somewhere along the line?

[goldbug9999]

The money paid in rent is either saved or spent by its recipient. So it either goes into the economy directly, or is available for someone else to borrow and then spend.

Of course money (generally) gets recirculated, but thats beside the point. Someone paying rent rather than spending it on the high street is a net loss to economy even if the landlord would have spent the paid rent on exactly the same thing the next day.

This is because the wealth generated in a economy depends on how often money changes hands and what product or service is rendered for each transaction. The rent payment results in a transaction where the "wealth" generated (the service of shelter provision) was relatively small compared to the amount paid due to artificially constrained supply. That rent payment transaction most likely took the place of another transaction that would have generated more wealth.

This is the bases of the broken window fallacy.

[okaycuckoo]

Direct egulation isnt the answer IMO. Better to create market conditions that make lenders more cautious e.g. make all secured loans non-recourse upon surrender of the asset, treat home equity as "savings" for the purpose of benefit means testing etc.

I think we effectively have non-recourse anyway.

Lenders don't seriously expect to recover shortfalls on repo sales + debt management plans have created a fantasy of repayment + most charging orders are away with the fairies, ie. they aren't enforced.

[the shaping machine]

Direct egulation isnt the answer IMO. Better to create market conditions that make lenders more cautious e.g. make all secured loans non-recourse upon surrender of the asset, treat home equity as "savings" for the purpose of benefit means testing etc.

On the theme of using market forces to self regulate mortgages, I think there is potential for using some of the ideas from "Islamic" mortgages.

i.e. The occupier of the house has a declared share of the equity which is gradually increased by repayments. Rent/interest is paid to the mortgage holder for the use of the remaining share. I would add a couple of refinements; no repossession after 50% equity is reached, and no repackaging and sale of mortgages to third parties.

Somehow we need to make sure mortgage providers have a more "skin the game".

Edited March 3, 2013 by the shaping machine