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RushRoad

The mathematics of increased renting and migration

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2011 cencus, table 7

https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/internationalmigration/articles/2011censusanalysissocialandeconomiccharacteristicsbylengthofresidenceofmigrantpopulationsinenglandandwales/2014-11-04

72.9% of recent arrivals (in the uk 0-5 years) rent privately

50.9% of recent arrivals (in the uk 5-10years) rent privately

14.7% of UK born rent privately

Without analysis this clearly shows that large migration will drive down the headline ownership rate and increase the headline renting rate.

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So how much has renting increased over the decade?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/609286/LT_101.xls

This from the ONS shows 2007 privately rented units as 3.6 million. The figures for 2017 are not out but it seems to be in the 5.5 million mark so renting has grown a massive 1.9 million units

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Over the last decade 2007-2017 there has been about 6 million inward migration as per the cencus link above 61.9% of these folk rent privately or about 3.7 million of them.

Homes in the UK are lived in at 2.4 persons per home so migrants over the decade have added about 1.55 million to rentals while growth of the rental stock has been about 1.9 million units

Or over 80% of the growth in renting is down to the boom in migrants over the decade

So UK born ownership and renting levels have no moved much

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I accept this may not be 100% accurate so no nit pickers please. Talk about the general point which is that recent arrivals clearly rent privately much more than uk born and we have had a lot of recent arrivals over the last 10 years so much of the boom in private renting is for that group not the locals.

 

What say you all?

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I'd like to refine the estimate

4.75 million (rather than 6 million as some portion go home) migrants over the decade 2007-2017

2.35 person s per rental property

65% of the migrants rent privately.

 

Gives a figure of additional 1.3 million properties rented by the 2007-2017 migrants out of an increase in the rental stock of about 1.9 million which is close to 70%

So migrants are 70% of the reason for the nominal increase in rented property numbers.

The housong stock has expanded about 7% over the same time so its reasonable to expect that the nominal number of rentals would have expanded 7% from the 3.6m in 2007 so that's 0.25 million units. 0.25 million out of 1.9 million increase in private rented homes equals 13%

So of the 1.9 million increase in rentals over the decade. Some 70% is down to migrants and 13% down to the expanding number of total homes.

The conclusion to this is that the rental sector for UK born has only expanded about 1% point while ownership is all down about 1% point from 2007 levels.

 

Of course the headlines are worse because they don't break down migrants and UK born.

UK born ownership levels have not crashed nor has UK born rentals boomed.

 

Interesting findings even if I do say so myself

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The proportions of indigenous v migrants are very interesting.  

In the 1980s and 1990s when they were saying that there was a need for more rental properties to help with UK job mobility they never once mentioned the "job" mobility in question might be for mass numbers of people arriving from overseas (a number of which might never have a job).

Edited by billybong

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9 hours ago, RushRoad said:

The housong stock has expanded about 7% over the same time so its reasonable to expect that the nominal number of rentals would have expanded 7% from the 3.6m in 2007 so that's 0.25 million units. 0.25 million out of 1.9 million increase in private rented homes equals 13%

What's the real number of rentals and what are you using as an inter-temporal discount rate?

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16 hours ago, RushRoad said:

I accept this may not be 100% accurate so no nit pickers please. Talk about the general point which is that recent arrivals clearly rent privately much more than uk born and we have had a lot of recent arrivals over the last 10 years so much of the boom in private renting is for that group not the locals.

 

What say you all?

Firstly, treating your thread with the seriousness it deserves, that's not how you spell census.

Consider this chart from the ONS:

Figure 1: Long-Term International Migration, UK, 2006 to 2016 (year ending September 2016)

f5b34705.png

(Source)

There's a certain kind of impoverished analysis of the UK housing market which we might call the 'One war at a time' model, or the even informally the RushRoad model. In shoddy thinking of this type you look at one factor because you have a certain thing in mind. Thinking like that is confirmation bias red in tooth and claw; idiocy of the most spectacular kind, f**kwittery so multifaceted in its ineptitude that it is in its own grim way both spectacular and wonderful.

The way that this rather limited thinking works in this case is as follows. Because house prices were rising and because you could, you, RushRoad, ended up with a big leveraged bet on house prices. You then encounter the argument that buy-to-let investors such as yourself have contributed to that rise in house prices. You also become aware that via various changes to tax rules and lending regulation the flow of new buy-to-let investors has reduced sharply and looks set to possibly remain low over the medium term, or possibly reduce even further.

As a result of these changes (of which you are now aware) you want to make your mind up as to whether or not house price inflation will continue and to that end you are trying to pick apart the argument that if a large number of leveraged landlords sell up, then prices will reduce.

When you first asked a related question here you received a very straightforward and compelling answer from Exiled Canadian, words to the effect of "Who knows?". Whilst at first glance it would seem likely that reducing effective demand and increasing supply would have an effect on the market, the fact remains that there is more than one factor that will change as time rolls forward; it is perfectly possible that new factors, as yet un-imagined, will also come into play.

You've now established to your own satisfaction that PRS has grown not because house prices have risen beyond what non-immigrant working households can afford, but because private investors have been satisfying a demand for rental property from immigrants.

That's all dandy, however it is irrelevant to your present quandary.

Consider this. London rents are falling at the moment. This was not widely anticipated. I've read two suggestions as to why; they are not mutually exclusive so both may be true. We can draw them together by proposing that the fall in net migration after Brexit and the glut of PRS supply coming to market to reflect the rush of completions before the April 2016 SDLT additional property surcharge means that there is presently a mismatch between supply and demand.

Consider this also: May looks likely to be in power come August and she has given every indication of being sincere in her desire to reduce net migration from current levels to the tens of thousands.

If she is successful in her stated aim then moving forwards the mismatch in supply and demand may worsen, and rents may fall further - unless the contraction of supply (reduction of the size of the PRS) is sufficient to offset reduction in demand (lower net migration).

Past changes to how the stock is distributed between tenure types and between immigrants and non-immigrants is irrelevant to the future path of prices. If what you are trying to do is to work out whether to take your profits by selling up or to keep your stake on the table and gamble for a bit more HPI then the answer is not in the past and no amount of banal post-hoc rationalisation of how prices have already moved will save you from making the wrong call.

You'll make a call and then future events will be the arbiter of whether or not you were lucky.

Edited by Bland Unsight

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12 hours ago, RushRoad said:

Interesting findings even if I do say so myself

Also, before you signed up we saw extensive research here on hpc from Dr T. Wig.

Wig found that when you rent it out (innit) to a bunch of Eastern Euros you can really pack 'em in.

I doubt you'd need more than a handful of HMOs to soak up a couple of thousands.

Edited by Bland Unsight

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Anyone who thinks an influx of millions of immigrants from Europe doesn't impact the demand and therefore the price of rental flats is a nutjob.*

 

* Yes i know many other factors are in place. 

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Where did you get 4.7mln of net migration? The graph above shows on average 200k-250k per annum, that is 2-2.5 mln 2007-2017.  With this number around 600k properties are rented by migrants, 30% of 1.9mln. 

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26 minutes ago, ccc said:

Anyone who thinks an influx of millions of immigrants from Europe doesn't impact the demand and therefore the price of rental flats is a nutjob.*

* Yes i know many other factors are in place. 

This effect is particularly marked if mug punters can get their hands on interest-only buy-to-let mortgages when the interest rates on those mortgages are falling.

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49 minutes ago, Bland Unsight said:

Also, before you signed up we saw extensive research here on hpc from Dr T. Wig.

Wig found that when you rent it out (innit) to a bunch of Eastern Euros you can really pack 'em in.

I doubt you'd need more than a handful of HMOs to soak up a couple of thousands.

Exactly......plasterboard comes in very handy, makes a family three bed into a six bed, share of bath and kitchen, share of fridge and micro, move up into the loft and out into the garage....pack 'em in pile 'em high. ;)

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36 minutes ago, ccc said:

Anyone who thinks an influx of millions of immigrants from Europe doesn't impact the demand and therefore the price of rental flats is a nutjob.*

 

* Yes i know many other factors are in place. 

Ditto for the exodus of ~3m EE migrants.

Borwns unholy trinity - tax credits, IO BTL and EE migrants.

 

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39 minutes ago, slawek said:

Where did you get 4.7mln of net migration? The graph above shows on average 200k-250k per annum, that is 2-2.5 mln 2007-2017.  With this number around 600k properties are rented by migrants, 30% of 1.9mln. 

 

It's not the net migration figure that counts but the number of non UK born living in the UK.

We know from the 2001 to 2011 cencus the non UK born increased by 3.1 million and I'm sure you can accept that 2007-2017 migration has been higher than the 2001-2011 average.

My estimate is non UK born increased by 4.75 million. We know gross inward migration was about 6 million so it's going to be a figure less than that but more than the 3.1 million incrasse of 2001-2011.

 

4.75 million over 2.35 persons per property equals 2 million properties. Some of the recent arrivals have purchased some are in social and about 65% are in rentals. So 1.3 million of the rental growth is due to recent arrivals (here for the last 0-10 years)

The rental stock has increased about 1.9 million units so close to 70% of the increase is down to migrants

Also the number of homes has increased 7% over the decade so the rental stock should have gone from 3.6 million to 3.85 million just from this 7% stock increase.

 

So overall less than 20% of the 1.9 million increase in renting is down to the UK born.

 

As to the person saying that migrants love ten to a rental that's false migrants already dominate the rental figures so of they were living 10 to a rental it would clearly show up yet the rental figures are 2.3-2.4 persons per Property

 

For anyone questioning this analysis please state what percentage of the 1.9 million increase in rentals was taken by recent (0-10 year) migrants. Thanks

 

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24 minutes ago, spyguy said:

Ditto for the exodus of ~3m EE migrants.

Borwns unholy trinity - tax credits, IO BTL and EE migrants.

All of which have now caught a bullet to some degree.

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2 hours ago, hotairmail said:

What about the expansion of student numbers?

Plus given the rising age of first time buyers seems to indicate you underestimate the extension of private renting to UK born.

 

The data is the data. It took me by surprise too. Renting has increased among the UK born but only a little bit. The majority is down to the migrants.

This makes sense seeing as about 80% of recent (0-5 year) migrants rent privately

It will be clear come the 2021 census as that shows ownership rental and social for both UK born and bin UK born. In 2011 it was 68.8% UK born owned. I reckon its only fallen to about 68.0% now in 2017

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1 hour ago, RushRoad said:

The data is the data. It took me by surprise too.

 

1 hour ago, RushRoad said:

For anyone questioning this analysis please state what percentage of the 1.9 million increase in rentals was taken by recent (0-10 year) migrants. Thanks

Anyone who can muster the energy to even read your analysis deserves a f**king medal.

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2 hours ago, RushRoad said:

 

It's not the net migration figure that counts but the number of non UK born living in the UK.

We know from the 2001 to 2011 cencus the non UK born increased by 3.1 million and I'm sure you can accept that 2007-2017 migration has been higher than the 2001-2011 average.

My estimate is non UK born increased by 4.75 million. We know gross inward migration was about 6 million so it's going to be a figure less than that but more than the 3.1 million incrasse of 2001-2011.

 

4.75 million over 2.35 persons per property equals 2 million properties. Some of the recent arrivals have purchased some are in social and about 65% are in rentals. So 1.3 million of the rental growth is due to recent arrivals (here for the last 0-10 years)

The rental stock has increased about 1.9 million units so close to 70% of the increase is down to migrants

Also the number of homes has increased 7% over the decade so the rental stock should have gone from 3.6 million to 3.85 million just from this 7% stock increase.

 

So overall less than 20% of the 1.9 million increase in renting is down to the UK born.

 

As to the person saying that migrants love ten to a rental that's false migrants already dominate the rental figures so of they were living 10 to a rental it would clearly show up yet the rental figures are 2.3-2.4 persons per Property

 

For anyone questioning this analysis please state what percentage of the 1.9 million increase in rentals was taken by recent (0-10 year) migrants. Thanks

 

You are overestimating the increase of the non-UK born people 2007-2017, it is around 3mln, not 4.75mln. With this number the percentage is around 40%.

Below the net migration to the UK in thousands from EU and non-EU if you sum 2001-2011 you get 3mln, matching census data, if you sum 2007-2015 you get 2.65mln, after adding 300k for 2016 you get 2.95mln (1.1mln EU, 1.8mln non-EU). 

  EU non-EU
2001 7 213
2002 7 234
2003 15 224
2004 87 266
2005 96 198
2006 104 218
2007 127 204
2008 63 187
2009 58 184
2010 77 217
2011 82 204
2012 82 157
2013 123 142
2014 174 194
2015 184 189

https://www.ons.gov.uk/generator?uri=/peoplepopulationandcommunity/populationandmigration/internationalmigration/bulletins/migrationstatisticsquarterlyreport/feb2017/12b8d66f&format=xls

 

Edited by slawek

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Been rooting around in the leaf litter and found this:

58fcf10f6b9e2_IFSBN161.png.7f3bcd5e1dbe9eacb15a6c124ed3abb2.png

Source: IFS Briefing Note BN161, February 2015

The there are two sets of changes that take place in the late 1980s, the Housing Act 1988 which significantly weakened security of tenure in the PRS and the Big Bang reforms of the City (and we can put the 1986 Building Society Act under that umbrella).

You can set the graph above alongside the factors underpinning population growth:

58fcf2c58f429_MigrationWatchpopulationgrowth.thumb.png.b922379609cb4364d69bc84b61a3de52.png 

Source: The Migration Watch Observatory, University of Oxford

If there was anything to the idea that immigration was making the weather when it came to the PRS then the massive run up of immigration from 1997 onwards ought to show up in rents, but it just doesn't. Net migration as a driver of population growth goes from nothing to three hundred thousand a year and rents don't even blink.

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48 minutes ago, slawek said:

You are overestimating the increase of the non-UK born people 2007-2017, it is around 3mln, not 4.75mln. With this number the percentage is around 40%.

Below the net migration to the UK in thousands from EU and non-EU if you sum 2001-2011 you get 3mln, matching census data, if you sum 2007-2015 you get 2.65mln, after adding 300k for 2016 you get 2.95mln (1.1mln EU, 1.8mln non-EU). 

  EU non-EU
2001 7 213
2002 7 234
2003 15 224
2004 87 266
2005 96 198
2006 104 218
2007 127 204
2008 63 187
2009 58 184
2010 77 217
2011 82 204
2012 82 157
2013 123 142
2014 174 194
2015 184 189

https://www.ons.gov.uk/generator?uri=/peoplepopulationandcommunity/populationandmigration/internationalmigration/bulletins/migrationstatisticsquarterlyreport/feb2017/12b8d66f&format=xls

 

 

Thanks for the data however the problem is you can not do the math on that net figure because lets say just as an example,

182,000 arrived that year and 100,000 left that year to make 82,000 net

Those who arrive just now are far more likely to rent whereas those who leave may have been here for a number of years and although more likely to rent than the uk born they are are less likely to rent than those who have just arrived.

I suppose we will know for sure when the 2021 census lands.

 

Even using the 3 million net figure you suggest, and 65% of them renting and 2.35 persons per property would equal 0.83 million rented properties

Rental property should have grown by 7% as we have 7% more homes so minusing that from the 1.9 figure we get a figure of 1.65 million of which 0.83 million were recent arrivals and the rest were locals so 50% of the increase is down to migrants 50% to uk born that is if we assume the net figure which as already explained is likely to be an underestimate of the impact.

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17 hours ago, RushRoad said:

I'd like to refine the estimate

This work from the University of Oxford on the 2016 ONS data suggests that after 5 years a quarter of foreign-born immigrants have moved out of the PRS and have become owner-occupiers (presumably mostly in Birmingham, given the excellent prices).

58fcf81bd8c3e_chart(1).thumb.jpeg.5b0eabf0a8551510561d153703646e58.jpeg

Source

 

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10 minutes ago, Bland Unsight said:

Been rooting around in the leaf litter and found this:

58fcf10f6b9e2_IFSBN161.png.7f3bcd5e1dbe9eacb15a6c124ed3abb2.png

Source: IFS Briefing Note BN161, February 2015

The there are two sets of changes that take place in the late 1980s, the Housing Act 1988 which significantly weakened security of tenure in the PRS and the Big Bang reforms of the City (and we can put the 1986 Building Society Act under that umbrella).

You can set the graph above alongside the factors underpinning population growth:

58fcf2c58f429_MigrationWatchpopulationgrowth.thumb.png.b922379609cb4364d69bc84b61a3de52.png 

Source: The Migration Watch Observatory, University of Oxford

If there was anything to the idea that immigration was making the weather when it came to the PRS then the massive run up of immigration from 1997 onwards ought to show up in rents, but it just doesn't. Net migration as a driver of population growth goes from nothing to three hundred thousand a year and rents don't even blink.

 

That's because the rental sector expanded to accommodate them, or rather that they were one of the big forces expanding the rental sector

Simply put if the rental sector had not grown from 2005 onward where would the 4 million or so net migrants into the UK have lived?

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3 minutes ago, Bland Unsight said:

This work from the University of Oxford on the 2016 ONS data suggests that after 5 years a quarter of foreign-born immigrants have moved out of the PRS and have become owner-occupiers (presumably mostly in Birmingham, given the excellent prices).

58fcf81bd8c3e_chart(1).thumb.jpeg.5b0eabf0a8551510561d153703646e58.jpeg

Source

 

 

Yes they are smart enough to see the good long term value in buying rather than renting

However what I was trying to point out was that a significant portion of the growth in rentals over the decade was down to the higher propensity of migrants to rent which is a fact. So when the bears say if prices are so affordable why has renting increased and ownership fallen, we will now know the reason is not down to price but down to the large influx of migrants over the decade and it explains why renting has increased and ownership fallen even in the cheapest regions and towns of the uk

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23 minutes ago, Bland Unsight said:

Been rooting around in the leaf litter and found this:

58fcf10f6b9e2_IFSBN161.png.7f3bcd5e1dbe9eacb15a6c124ed3abb2.png

Source: IFS Briefing Note BN161, February 2015

The there are two sets of changes that take place in the late 1980s, the Housing Act 1988 which significantly weakened security of tenure in the PRS and the Big Bang reforms of the City (and we can put the 1986 Building Society Act under that umbrella).

You can set the graph above alongside the factors underpinning population growth:

58fcf2c58f429_MigrationWatchpopulationgrowth.thumb.png.b922379609cb4364d69bc84b61a3de52.png 

Source: The Migration Watch Observatory, University of Oxford

If there was anything to the idea that immigration was making the weather when it came to the PRS then the massive run up of immigration from 1997 onwards ought to show up in rents, but it just doesn't. Net migration as a driver of population growth goes from nothing to three hundred thousand a year and rents don't even blink.

Maybe.

The Ramp up with migration strangely coincides with the tax credits#2, where the pay out was ramped up massively in 2004.

Which also coincided with the massive ramp up of IO BTL.

I reckon the two things sort of cancelled each other out - flood of migrants met with a flood of rentals.

Now, I reckon, post Brexit, that the migrants are going home - whether they want to or nor.

Those rentals are going nowhere.

 

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1 minute ago, spyguy said:

Maybe.

The Ramp up with migration strangely coincides with the tax credits#2, where the pay out was ramped up massively in 2004.

Which also coincided with the massive ramp up of IO BTL.

I reckon the two things sort of cancelled each other out - flood of migrants met with a flood of rentals.

Now, I reckon, post Brexit, that the migrants are going home - whether they want to or nor.

Those rentals are going nowhere.

 

 

If the migrants go home, then landlords will have no choice but to sell as the alternative is more and more and more voids

Just as in 2005-2017 the mass migrants gave the impetus for the growth in the rental sector

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