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Average London Rent Has Fallen For Seven Months Straight

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To hear the media talk you'd think London rents were on an unstoppable course upwards, but actually the average is down 5.5% since the peak in September 2015.

I've just got together the data contained in each of LSL's monthly buy-to-let reports since January 2014 (source here - http://www.lslps.co.uk/news) up to April 2016. Strangely, their reports have glossed over what's been happening in London, but here's what the data shows:

Average monthly rent has fallen for seven months straight:

i87or76.jpg

Annual rate of change close to going negative:

CeN303R.jpg

Gross yields hit a new low (sorry about the missing data point for Nov 2014, that report is missing):

sRlEzDr.jpg

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Yes but look at the graph per page 3 of the report which shows data from 2010.

Rent increases are highly seasonal by the looks of things and your statement about rents having fallen for 7 months straight could have been made at any March over the past 5 years.

I hope this does mark a reversal and the fall does seem steeper than previous years but at this point I don't think we can jump to conclusions.

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Yes but look at the graph per page 3 of the report which shows data from 2010.

Rent increases are highly seasonal by the looks of things and your statement about rents having fallen for 7 months straight could have been made at any March over the past 5 years.

I hope this does mark a reversal and the fall does seem steeper than previous years but at this point I don't think we can jump to conclusions.

Eh? Look at the same period for 2014/15.

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correlates with my rent search this past month.

LA's across East and NW London I'v e spoken with getting twitchy. Of course the BTL'ers will offset tax changes by raising rents! :))))))

Edited by Tapori

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Ive definetly noticed a softening of rents over the last 6 months. Could never find something for under 600 anymore. Now there seems quite a bit.

Is there a YoY rent trend?

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when booming BTL buys 3 person family homes and rents out 6 rooms, rents fall! That's why there is no supply problem, there is only a cheap money driven demand problem.

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Yes but look at the graph per page 3 of the report which shows data from 2010.

Rent increases are highly seasonal by the looks of things and your statement about rents having fallen for 7 months straight could have been made at any March over the past 5 years.

I hope this does mark a reversal and the fall does seem steeper than previous years but at this point I don't think we can jump to conclusions.

Fair point Growlers, so I've done some more work and gone back as far in time as possible for London. I could say we're each half-right, though mainly I'm appalled at the increases since 2010.

wWj5Akw.jpg

You're right in that rents tend to fall during the winter months nationally, but I'd take that and say it's not totally true for London (see winter 2010/11 and winter 2011/12).

Also there hasn't been an unbroken run of seven months of falls until this year. It could just be the market taking a breather after the crazy summer of 2015, but things are the weakest they've been in the series.

Here's the annual rate of change since Dec 2010:

1m97ywI.jpg

And here's what's happened to yields - how low can you go:

ph14U5c.jpg

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Correlates with what I'm seeing locally, which is that rents are falling from 'really cheap' to 'amazingly cheap' when compared tobuying.

I keep trying to explain this to the mrs, but it's a struggle and she still wants to buy. When I show her the difference (Victorian 3-bed to rent in nice area vs ex-council 3-bed flat in rough area) I'm convinced she'll relent.

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Fair point Growlers, so I've done some more work and gone back as far in time as possible for London. I could say we're each half-right, though mainly I'm appalled at the increases since 2010.

Worth noting that in July 2015 the government froze LHA, though the coincidence is with the announcement of the change.

Since 2011 whilst the headline was that LHA annual increases were capped at 1% there were Broad Rental Market Areas where the cap was actually 4% and virtually all of outer London, and a fair amount of inner London increased at the 4% rate in April 2015, (for example).

It will be pretty striking if London rent increases fall way now that LHA is totally capped, (h/t lastlaugh who introduced me to the argument that LHAs have potentially a far bigger role in London than is generally considered). Perhaps not by coincidence the annualised rate of inflation over the period of your graph is damn near 4%.

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Worth noting that in July 2015 the government froze LHA, though the coincidence is with the announcement of the change.

Since 2011 whilst the headline was that LHA annual increases were capped at 1% there were Broad Rental Market Areas where the cap was actually 4% and virtually all of outer London, and a fair amount of inner London increased at the 4% rate in April 2015, (for example).

It will be pretty striking if London rent increases fall way now that LHA is totally capped, (h/t lastlaugh who introduced me to the argument that LHAs have potentially a far bigger role in London than is generally considered). Perhaps not by coincidence the annualised rate of inflation over the period of your graph is damn near 4%.

Nah.

All people living in London are hedge fund managers, earning £1m/year.

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Worth noting that in July 2015 the government froze LHA, though the coincidence is with the announcement of the change.

Since 2011 whilst the headline was that LHA annual increases were capped at 1% there were Broad Rental Market Areas where the cap was actually 4% and virtually all of outer London, and a fair amount of inner London increased at the 4% rate in April 2015, (for example).

It will be pretty striking if London rent increases fall way now that LHA is totally capped, (h/t lastlaugh who introduced me to the argument that LHAs have potentially a far bigger role in London than is generally considered). Perhaps not by coincidence the annualised rate of inflation over the period of your graph is damn near 4%.

On the BOLD point - despite the media claims, London's resident population is like Middlesborough - a load of doleys sat around, getting their rent paid by the state.

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Good thread Patient.

I used this data a couple of months ago to argue against a rent increase when I was living in London (it didn't work). I forgot to check it again until I saw your thread.

This is indexed from Jan 2011:

BS3e0qb.jpg

There's obviously a lot of seasonality in the SE and UK plots which we haven't seen in London for a while. Perhaps London doesn't have the same seasonality or maybe the huge rent inflation took the seasonal effects out of play. This could be a return to seasonality or a genuine dip, but it's nice to see. The seasonal swings in the SE are crazy. The dip in late 2013 was £805->£747 peak to trough. It'll be very interesting to see next month's figures.

Rplot02.jpeg

post-41143-0-70060000-1464637457_thumb.jpeg

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On the BOLD point - despite the media claims, London's resident population is like Middlesborough - a load of doleys sat around, getting their rent paid by the state.

Or more likely they are workers getting min wages and cannot wipe the A_holes of the rich residents unless they get housing benefit to stay in London. ie another subsidy to the rich.

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Gearing up for reduced benefit cap?

Or, good tenants may have been lured by HAs  into shared accommodation/HTB/rent to buy/r20-40%discounted market rent kind of schemes so the amateur BTL kind of rents have started declining?

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On 30/05/2016 at 0:09 PM, Bland Unsight said:

Worth noting that in July 2015 the government froze LHA, though the coincidence is with the announcement of the change.

Since 2011 whilst the headline was that LHA annual increases were capped at 1% there were Broad Rental Market Areas where the cap was actually 4% and virtually all of outer London, and a fair amount of inner London increased at the 4% rate in April 2015, (for example).

It will be pretty striking if London rent increases fall way now that LHA is totally capped, (h/t lastlaugh who introduced me to the argument that LHAs have potentially a far bigger role in London than is generally considered). Perhaps not by coincidence the annualised rate of inflation over the period of your graph is damn near 4%.

There is a change to the (overall) benefit cap coming in on the 7th November. In London, the benefit cap will be reduced by £3k to £23k total benefits (including LHA) and outside London it will be reduced by £6k to £20k.

I blame AirBnB for a lot of the squeezing of supply (presumably a lot of landlords have switched to AirBnB to make more money in less time than renting to a normal tenant).

Edited by fru-gal

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BTL is the soft underbelly of the housing market now. Overleveraged participants whose "business" model will fall apart without steady income stream. Lowering rents are pressurising, voids are crippling. Those properties that are empty have no chain to slow the sales process and in all all likelihood if they cannot be let will be sold, and quickly too. These sales will be the new marker for local house pricing in that range of properties. The shift could be sudden.

If you were a migrant worker in UK with substantial sums still in UK you'd be tempted to repatriate that money, that might also be the trigger to repatriate yourself too as the economic fail to stack up. Watch the cost and availability of flights, I believe the low cost airlines are hurting due to increased costs, the headline may still say 20 quid for a flight but try getting one that tallies with a commute and most likely you'll be in for a shock. 

 

 

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3 hours ago, onlyme2 said:

BTL is the soft underbelly of the housing market now. Overleveraged participants whose "business" model will fall apart without steady income stream. Lowering rents are pressurising, voids are crippling. Those properties that are empty have no chain to slow the sales process and in all all likelihood if they cannot be let will be sold, and quickly too. These sales will be the new marker for local house pricing in that range of properties. The shift could be sudden.

If you were a migrant worker in UK with substantial sums still in UK you'd be tempted to repatriate that money, that might also be the trigger to repatriate yourself too as the economic fail to stack up. Watch the cost and availability of flights, I believe the low cost airlines are hurting due to increased costs, the headline may still say 20 quid for a flight but try getting one that tallies with a commute and most likely you'll be in for a shock. 

 

 

You seem to forget that all rents are going to increase magically in April when 118's rent rise day happens. The laws of supply and demand will be torn asunder.

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On 5/30/2016 at 10:59 AM, the_duke_of_hazzard said:

Correlates with what I'm seeing locally, which is that rents are falling from 'really cheap' to 'amazingly cheap' when compared tobuying.

I keep trying to explain this to the mrs, but it's a struggle and she still wants to buy. When I show her the difference (Victorian 3-bed to rent in nice area vs ex-council 3-bed flat in rough area) I'm convinced she'll relent.

Well, this continues, and my wife is now fully persuaded.

Now seeing 5-bed Victorian houses in very fancy roads for rent very cheap and not shifting. It's all quite lovely, frankly.

No updates here though: http://www.lslps.co.uk/news

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A significant change - thou some years old? (**) - is that LLs have to pay council tax on empty properties - they are allowed 1 month's grace. This will intensify the need to let and make empty properties even more costly.

 

(**)EDIT: April 2013!

Until 1st April 2013 if you owned or rented an empty and unfurnished property you could claim an exemption for up to six months. This was called a class C exemption. After six months you would have had to start paying council tax again at the full rate for your property. 

From 1 April 2013 this exemption has been replaced by a local discount of 100% for one calendar month. On 1st April 2013 all existing exemptions will end, because these properties will already have been unoccupied and unfurnished for longer than one calendar month.

After one month of 100% discount, the full council tax charge for the property has to be paid. If the property remains unoccupied and unfurnished for two years or more, the council tax will increase to 150%.

Edited by dryrot
add data

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