Jump to content
House Price Crash Forum
Sign in to follow this  
gruffydd

Are Rising Rents Driving Prices?

Recommended Posts

Just a thought - with rents rising in double figures in places like Bristol, and buy-to-let landlords dominating the market in many places, are rents driving prices like never before? Thoughts/evidence (including anecdotals) welcome.

Something else - am noticing the return of the subprime buyer - "easy money" mortgages appear to have made a return... just anecdotal but based on buyers I know in my area - I know their incomes and so on.

Share this post


Link to post
Share on other sites

Just a thought - with rents rising in double figures in places like Bristol, and buy-to-let landlords dominating the market in many places, are rents driving prices like never before? Thoughts/evidence (including anecdotals) welcome.

Something else - am noticing the return of the subprime buyer - "easy money" mortgages appear to have made a return... just anecdotal but based on buyers I know in my area - I know their incomes and so on.

My concerns about this line of argument.

  • The bonkers rent inflation figures that turn up in VI sources like the HomeLet data never tally with the more robust data sets, where rents move in close step with wage inflation, hence I'd take some convincing that there was double digit rent inflation
  • Buy-to-let investors do not dominate the PRS. They account for about 40% of the PRS stock, (just compare the DCLG tenure data to the number of BTL mortgages from the CML)

Share this post


Link to post
Share on other sites

Just a thought - with rents rising in double figures in places like Bristol, and buy-to-let landlords dominating the market in many places, are rents driving prices like never before? Thoughts/evidence (including anecdotals) welcome.

Something else - am noticing the return of the subprime buyer - "easy money" mortgages appear to have made a return... just anecdotal but based on buyers I know in my area - I know their incomes and so on.

I rented a house almost identical to this one in the same estate between 2001-2003. I paid £815 a month, now the rent is £900 a month.

http://www.rightmove.co.uk/property-to-rent/property-39693588.html

When I moved out in 2003 these houses sold for roughly £160k, they now sell for £280k-£300k.

So it is only the low mortgage rates that are making these places "investments"

Share this post


Link to post
Share on other sites

I rented a fairly grotty one bed flat in Bristol in 2002, it cost me £450 per month. It was four rooms plus windowless box room, bed/bath/kitchen/living room.

I saw the very same flat available to rent on Rightmove a few months ago. It had had a minor makeover but was still grotty, but now it was available for £900 per month!! :o
It was advertised as two bed, the living room was now a second bedroom and the box room was a "small living area".

Shameful really.

Share this post


Link to post
Share on other sites

My concerns about this line of argument.

  • The bonkers rent inflation figures that turn up in VI sources like the HomeLet data never tally with the more robust data sets, where rents move in close step with wage inflation, hence I'd take some convincing that there was double digit rent inflation
  • Buy-to-let investors do not dominate the PRS. They account for about 40% of the PRS stock, (just compare the DCLG tenure data to the number of BTL mortgages from the CML)

If you lived in the SE you would certainly believe that these ridiculous rent increases are happening.

Average rent for 3 bed semi in my local area (E Berks) in 2008 was £850 pm. Now about £1400 pm. 64% rise in 8 years.

Somehow I doubt wages round here have not gone up by this much...

Not long ago our rent was put up by 10%. When I tried to contest this, the LA's reply was "We can find another tenant who will pay more that your increased rent. Your rent is below average for the area so it is going up and it will keep on going up." So, we looked around at other places in the area and were shocked to find that the increased rent for the 3 bed house we are in was lower than anything similar that was available. About 6 months ago, a house 3 doors down, slightly smaller than ours, was let for £1400 pm within a week of being advertised. In 2008 the same house was let at £825 pm. (I know this because we went to view that house as well as ours.)

How people are paying these amounts is beyond me.

Share this post


Link to post
Share on other sites

Just a thought - with rents rising in double figures in places like Bristol, and buy-to-let landlords dominating the market in many places, are rents driving prices like never before? Thoughts/evidence (including anecdotals) welcome.

Something else - am noticing the return of the subprime buyer - "easy money" mortgages appear to have made a return... just anecdotal but based on buyers I know in my area - I know their incomes and so on.

First of all it's the sign of a broken market (full of greedy knuts). What I suspect happens is BTL LL buys a property that went up in price 10% over the last year and rents it out at lets say £1000pcm. Neighbouring BTL flat LL who bought a year ago (and so paid less) was charging £900pcm but seeing what his neighbour gets wants £1000 as well and hikes the rent, so boom we have >10% increase in rent. I think BTL LL greed is driving house prices and hence rents up.

I've been seeing those BMV adverts on various TV stations over the past few weeks (since the New Year) haven't seen them for years!

Share this post


Link to post
Share on other sites

If you lived in the SE you would certainly believe that these ridiculous rent increases are happening.

My own interpretation (mostly from viewing rightmove) is that on a like for like basis, rentals have only increased modestly compared to 10 years ago, but there has been massive investment/modernisation/gentrification and these properties have 50% or more risen.

10 years ago, the rental property market was a grim place. Now lots of them look like quite fancy.

Share this post


Link to post
Share on other sites

My own interpretation (mostly from viewing rightmove) is that on a like for like basis, rentals have only increased modestly compared to 10 years ago, but there has been massive investment/modernisation/gentrification and these properties have 50% or more risen.

10 years ago, the rental property market was a grim place. Now lots of them look like quite fancy.

Believe me, the house down the road is not one of the fancy ones. My neighbour went to "visit" the new tenants and commented on how poky the place looked. Apparently it has had a new coat of paint (magnolia of course) and new carpets, but the same 80s/90s style kitchen is still there as well as the avocado bathroom suite.

Share this post


Link to post
Share on other sites

London still has many areas that still have some slack left in rent rises. Shouldn't go up, but they will due to no regulation and sheer greed.

My last place, the rent shot up from 1500 to 1850 a month after about 2 years. Right in East London past the Hammers stadium.

London wise, I see the less desirable areas increasing rents at a ridiculous pace; The other areas where rents have saturated/peaked are obviously not showing the same growth as you rightly mention partly due to lack of wage growth.

I can see a perfect storm as the remaining areas creak under rent increases and the the HPC starts with rents following the same direction. Or maybe Rents will not fall as a hard as house prices?

- I would say rising House prices drove higher rents; The more BTL scum cornered housing, the more they could charge a premium to desperate tenants, the more the yields were, the more attractive they would be for other BTL investors and the more the house price could be jacked up in price.

Special Mention to the Captain CoNTS that are the EA's and above all the unregulated smiley smarmy slimey shits that are Lettings Agents. Absolute scum.

Share this post


Link to post
Share on other sites

I find it interesting how much disagreement there is on how much rents have changed. Could much of the disagreement be explained by much higher rental price dispersion than sale price dispersion? Is this mostly to do with the good tenant as compensating differential and risk averse (or just rational) landlords freezing rents to keep good tenants and avoid voids?

Share this post


Link to post
Share on other sites

I find it interesting how much disagreement there is on how much rents have changed. Could much of the disagreement be explained by much higher rental price dispersion than sale price dispersion? Is this mostly to do with the good tenant as compensating differential and risk averse (or just rational) landlords freezing rents to keep good tenants and avoid voids?

It's a good point and yeah related to some key issues about good/bad tenants, rent paid on time, maintenance, landlord and area. Rents are different as people can leave earlier with less fuss than buying or selling but what also dramatically skews data about rents is the sheer amount (in London at least) of shared and single rental rooms that are sub let. Just check the local adds on shop windows,

Share this post


Link to post
Share on other sites

I find it interesting how much disagreement there is on how much rents have changed. Could much of the disagreement be explained by much higher rental price dispersion than sale price dispersion? Is this mostly to do with the good tenant as compensating differential and risk averse (or just rational) landlords freezing rents to keep good tenants and avoid voids?

On aggregate, you'd expect rents to rise with income, however:

1. Local changes cause rents to fluctuate around the background level. For example, places close to cross-rail station will see rent increases, regardless of what is going on elsewhere.

2. Markets aren't perfect, and the market for rented accommodation isn't nearly as liquid as stock markets. Price discovery is slower, and this can cause prices to lag, and then jump.

3. Not everyone negotiates the best prices, and some landlords get lucky.

4. Not all houses are the same, nor are all locations the same, and that isn't immediately obvious from looking at rightmove.

5. Averages have to calculated carefully, to avoid changes in the composition of the rental market. Increasingly better-off people are forced to rent later in life. Since they can afford higher rents, they will be forced to pay higher rents, and this will increase a naive average.

I don't know whether average rents are rising or not, where I am they seem to be roughly static compared to inflation. However, anecdotes are not data, and you can't learn much from them.

In economics, even data is not always data since so much of it is really a sales pitch or some form of marketing.

Put together, all of these factors make it very difficult to judge what is really happening in the rental market without finding a reliable statistical analysis.

Edited by BuyToLeech

Share this post


Link to post
Share on other sites

If you lived in the SE you would certainly believe that these ridiculous rent increases are happening.

Average rent for 3 bed semi in my local area (E Berks) in 2008 was £850 pm. Now about £1400 pm. 64% rise in 8 years.

Somehow I doubt wages round here have not gone up by this much

I do live in the South East, and I see rents that have hardly moved in ten years in real terms.

Share this post


Link to post
Share on other sites

I do live in the South East, and I see rents that have hardly moved in ten years in real terms.

Agreed. We've been renting in SE Berkshire for 5 years. Including one move which involved lots of house hunting. Prices have gone up around 8-10% in that time, so pretty much in line with inflation.

Share this post


Link to post
Share on other sites

Agreed. We've been renting in SE Berkshire for 5 years. Including one move which involved lots of house hunting. Prices have gone up around 8-10% in that time, so pretty much in line with inflation.

What part are you in? Evidently not in Windsor & Maidenhead or Bracknell Forest. Wokingham district doesn't seem to have gone up as much, but rents there were higher to start with.

Share this post


Link to post
Share on other sites

First of all it's the sign of a broken market (full of greedy knuts). What I suspect happens is BTL LL buys a property that went up in price 10% over the last year and rents it out at lets say £1000pcm. Neighbouring BTL flat LL who bought a year ago (and so paid less) was charging £900pcm but seeing what his neighbour gets wants £1000 as well and hikes the rent, so boom we have >10% increase in rent. I think BTL LL greed is driving house prices and hence rents up.

I've been seeing those BMV adverts on various TV stations over the past few weeks (since the New Year) haven't seen them for years!

Yes there's definitely something in this - looking at prices round me. They are being advertised at anything upto 40% higher than 2010 at the moment - it's quite a shock. I'm in a localised bubble in a bubble. The local wages certainly couldn't cover these rent rises - priced out of Cambridge money might just be able to.

However they have reached top whack now IMHO. There may be a spike whilst the buy to letters realise the change,and then I expect a complete collapse. The majority of people actually working in this town are probably on *less* than min wage (because the prime industry pays mainly cash in hand).

Share this post


Link to post
Share on other sites

I find it interesting how much disagreement there is on how much rents have changed. Could much of the disagreement be explained by much higher rental price dispersion than sale price dispersion? Is this mostly to do with the good tenant as compensating differential and risk averse (or just rational) landlords freezing rents to keep good tenants and avoid voids?

Or is it explained by the fact that the plural of anecdote is not data?

Your thoughtful post spells out why there might be room for anecdote and data to disagree, but before lifting our eyes to the horizon of this more interesting question I feel that we should nail down the fact that anecdotal reports of how some rents wot I remembered went up loads do not require any explanation. Given the lack of rigour in the selection of the data you end up trying to explain noise, and that is a fool's errand.

Share this post


Link to post
Share on other sites

Yes there's definitely something in this - looking at prices round me. They are being advertised at anything upto 40% higher than 2010 at the moment - it's quite a shock. I'm in a localised bubble in a bubble. The local wages certainly couldn't cover these rent rises - priced out of Cambridge money might just be able to.

However they have reached top whack now IMHO. There may be a spike whilst the buy to letters realise the change,and then I expect a complete collapse. The majority of people actually working in this town are probably on *less* than min wage (because the prime industry pays mainly cash in hand).

FWIW whenever I go through a spell of watching market rents for my patch I usually see properties advertised at rates which suggest rampant rent inflation, e.g. £900 pcm 24 months ago, now £1150 pcm. They sit on the portals till they cut the rent down to the market rate (which does not appear to markedly inflate) and then they clear off the market. This is consistent with the robust data sets. Given how people pay rent with earnings not credit, it is also plausible. The housing shortage argument might explain some degree of HPI between 1970 and today, but asking it to explain a 10% hike in rents over a year as the economy falters with CPI at 0% and wage inflation below 2% is, in the technical vernacular, full retard.

tumblr_moz0rx8lzE1sqv808o1_250.gif

Share this post


Link to post
Share on other sites

FWIW whenever I go through a spell of watching market rents for my patch I usually see properties advertised at rates which suggest rampant rent inflation, e.g. £900 pcm 24 months ago, now £1150 pcm. They sit on the portals till they cut the rent down to the market rate (which does not appear to markedly inflate) and then they clear off the market. This is consistent with the robust data sets. Given how people pay rent with earnings not credit, it is also plausible. The housing shortage argument might explain some degree of HPI between 1970 and today, but asking it to explain a 10% hike in rents over a year as the economy falters with CPI at 0% and wage inflation below 2% is, in the technical vernacular, full retard.

tumblr_moz0rx8lzE1sqv808o1_250.gif

Unfortunately, when dealing with frightened renters and greedy agents here in London, I don't know if I believe the validity of the above statement by Mr. Downey-Junior. They have gone full.

Share this post


Link to post
Share on other sites

I find it interesting how much disagreement there is on how much rents have changed. Could much of the disagreement be explained by much higher rental price dispersion than sale price dispersion? Is this mostly to do with the good tenant as compensating differential and risk averse (or just rational) landlords freezing rents to keep good tenants and avoid voids?

I think this nails the most likely answer for the confirmation/disbelief on this topic.

My own experience is completely inconsistent, but I've been blessed to be living high end London and the rent compression there is I suspect a sign of the massive amounts of fraud in high end London set against the massive demand in real (I could have a family there) housing. I say fraud and I mean fraud - mis-selling to foreign investors, unlivable space, swap transactions in place of actual cash, empty housing (not technically fraud .. but it should be chargable).

Very far cry from the 300 quid a month I shared to live in Hadfield (just outside Manchester where league of Gentlemen was filmed) almost 15 years ago. I was hungry (literally), but it was a nice house. I'm barely doing better housing wise now and I'm at 2.5k/month. Central heating is a boon of course, but since I could buy underfloor heating for 4 months rent now .. you'll forgive me if I don't regard that as an upgrade.

Share this post


Link to post
Share on other sites

What part are you in? Evidently not in Windsor & Maidenhead or Bracknell Forest. Wokingham district doesn't seem to have gone up as much, but rents there were higher to start with.

Wokingham. Agreed Bracknell used to be cheaper as I remember from looking when we first moved down here 5 years ago. Now it's on par with Wokingham.

Share this post


Link to post
Share on other sites

I know that in my area there are lots of very high priced rentals that are paid for by companies bringing people in. They really do pay stupid amounts. There is a 5 bedder a few doors up that is 14k per week. Yes 14k per week. 4k is a decent family home around here for the corporate crowd.

Now, i'm guessing that as companies seek to cut costs in the coming year, these expensive arrangements will be some of the first to go. That should let some air out of the top end.

Share this post


Link to post
Share on other sites

After being out of the rental market for 6 years, I recently looked at a few with a view to possibly renting for a few months between selling the boat and buying a house, affording me some time to wait and see if prices fall, and I was surprised as I had expected rents to have increased by much more in that time.

But if rents are increasing faster than wages, it'd make more sense to me that prices were driving rents rather than vice versa.

My logic being, as HPI outprices more people, the average wage of those forced to rent increases.

Share this post


Link to post
Share on other sites

Another thought on this - The max amount of HB paid is supposed to be based on the lowest priced 1/3 of properties. As landlords are not that keen to have HB recipients in their properties, especially since LLs no longer receive the payment directly, they do their best to ensure that their properties are not within the lowest 1/3. Instead of HB restrictions driving rents downward, they are instead now driving rents up.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • Next General Election   94 members have voted

    1. 1. When do you predict the next general election will be held?


      • 2019
      • 2020
      • 2021
      • 2022

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.