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suresh786

Rents fall and void periods lengthen as supply starts to exceed demand

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Oh no.....poor souls! Hang on, I thought with S24 in place they were all going to raise the rents....wonder what happened there then?

Is it just me or has the past week seen more bear food than I can remember, just need this to go into the MSM tomorrow to stoke the fires nicely.

Bring it on. 

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Anyone who could take a rent rise would be buying or saving or both....not renting with increasing rents......the councils can't pay the extra either.;)

 

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The flat we vacated at the end of August when we purchased our new house has been sitting empty despite them reducing the rent back to the level we paid when originally moving in there in Easter 2016. I guess the issue is slightly more nuanced since the LL owns the entire block and reducing the rent further might cause the other tenants to start to ask for a reduction too. 

Having said that he doesn't need the money, of the five units only three were occupied when we moved in and only one more was finished.... about 14 months after we moved in. There's one more unit left to complete but no action on that at all.

The interesting thing will be if the BTL lot start having to subsidise their BTL mortgages and become forced sellers. I maintain there will be no crash without forced sellers in increasing numbers. 

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13 minutes ago, Smiley George said:

Oh no.....poor souls! Hang on, I thought with S24 in place they were all going to raise the rents....wonder what happened there then?

Is it just me or has the past week seen more bear food than I can remember, just need this to go into the MSM tomorrow to stoke the fires nicely.

Bring it on. 

Someone need to email it MSM and they might go for it

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8 minutes ago, adarmo said:

The flat we vacated at the end of August when we purchased our new house has been sitting empty despite them reducing the rent back to the level we paid when originally moving in there in Easter 2016. I guess the issue is slightly more nuanced since the LL owns the entire block and reducing the rent further might cause the other tenants to start to ask for a reduction too. 

Having said that he doesn't need the money, of the five units only three were occupied when we moved in and only one more was finished.... about 14 months after we moved in. There's one more unit left to complete but no action on that at all.

The interesting thing will be if the BTL lot start having to subsidise their BTL mortgages and become forced sellers. I maintain there will be no crash without forced sellers in increasing numbers. 

I also think that there will not be a crash but slow decline, for crash you need a proper recession and no bail-outs

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I can vouch for this.  In the process of downsizing rental as offspring are moving on.  Seeing good supply in a very small search area in London NE of Stratford.

The flat we are leaving has been re-listed with an asking only 3.3% more than I'm paying which was a relatively good deal just over a year ago.  So it's almost certain to be rented for less than we are paying.

Have just offered 14% off original asking for potential new flat and they countered with 8.5% off.  It took 5 minutes for the agent to call landlord, discuss and come back to me with a response.  That was on Thursday evening.  Letting them stew. Looking at a nice looking place tomorrow and another later this week.

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1 hour ago, suresh786 said:

I also think that there will not be a crash but slow decline, for crash you need a proper recession and no bail-outs

THIS ^.

The props will stop it being a massive collapse, but all the farcical supply nonsense will ensure endless over-supply that will slowly sink the market I reckon. The VIs will then talk about a "cooling" of the market, stupid t0ssers.

Couple of per cent each month will keep being played down with lots of bluff, but the reality will probably be a long term protracted decline followed by years of stagnation.

 

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4 minutes ago, wsn03 said:

THIS ^.

The props will stop it being a massive collapse, but all the farcical supply nonsense will ensure endless over-supply that will slowly sink the market I reckon. The VIs will then talk about a "cooling" of the market, stupid t0ssers.

Couple of per cent each month will keep being played down with lots of bluff, but the reality will probably be a long term protracted decline followed by years of stagnation.

 

ie, how things were playing out from 2010 - 13, when Gidiot decided that a little house price boom would make everyone happy.

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1 hour ago, suresh786 said:

I also think that there will not be a crash but slow decline, for crash you need a proper recession and no bail-outs

I think you are wrong.

The previous crashes involved OO paying too much for houses ,taking on too much debt.

The majority of the houses sold in the last 15 years have gone to 'investors', buying BTL with mortgages.

The dynamics are totally different.

We are likely to get ~10 years stock dumped on the market in a year or so.

And this market is down to ~20% of sales in a 'normal' pre 2004/no BTL market.

 

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Dont forget about other countries beyond the control of UK plc which will have a reprocussion here.. China and Russias ecconomys dont look too rosey at the moment

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12 minutes ago, spyguy said:

I think you are wrong.

The previous crashes involved OO paying too much for houses ,taking on too much debt.

The majority of the houses sold in the last 15 years have gone to 'investors', buying BTL with mortgages.

The dynamics are totally different.

We are likely to get ~10 years stock dumped on the market in a year or so.

And this market is down to ~20% of sales in a 'normal' pre 2004/no BTL market.

 

It's a good point, but I doubt the difference will be that marked. Without an IR rise, the BTL brigade will drip-drip money in a slow slide to destitution rather than face reality. They will describe this to their friends as "being resolute and not being in thrall to minor market fluctuations".

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44 minutes ago, spyguy said:

I think you are wrong.

The previous crashes involved OO paying too much for houses ,taking on too much debt.

The majority of the houses sold in the last 15 years have gone to 'investors', buying BTL with mortgages.

The dynamics are totally different.

We are likely to get ~10 years stock dumped on the market in a year or so.

And this market is down to ~20% of sales in a 'normal' pre 2004/no BTL market.

 

The BTL does have a lot of marginal buyers working off 5% gross yields who are in the line of fire S24 wise.

28 minutes ago, tomandlu said:

It's a good point, but I doubt the difference will be that marked. Without an IR rise, the BTL brigade will drip-drip money in a slow slide to destitution rather than face reality. They will describe this to their friends as "being resolute and not being in thrall to minor market fluctuations".

S24 is the equivalent of a rate rise and then some in terms of decimating the slim profit margin for 80%+ leveraged BTL.

It really depends how many can cling on.

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41 minutes ago, Monkey said:

Dont forget about other countries beyond the control of UK plc which will have a reprocussion here.. China and Russias ecconomys dont look too rosey at the moment

Then there's issues like Catalonia...and secession in Northern Italy.Two countries with solid banking systems..................

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11 minutes ago, Sancho Panza said:

The BTL does have a lot of marginal buyers working off 5% gross yields who are in the line of fire S24 wise.

S24 is the equivalent of a rate rise and then some in terms of decimating the slim profit margin for 80%+ leveraged BTL.

It really depends how many can cling on.

Decimating doesnt do S24 justice.

Taken from iodt BTL known to me:

Rent 1000.

IO mortgage 850 (and thats on a 2 year low started  mortgage, wich I dont think is available).

Profit - 150/m

Post S24

Rent 1000.

Tax 500

Mortgage 850

Loss: 450/m

 

 

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7 minutes ago, spyguy said:

Decimating doesnt do S24 justice.

Taken from iodt BTL known to me:

Rent 1000.

IO mortgage 850 (and thats on a 2 year low started  mortgage, wich I dont think is available).

Profit - 150/m

Post S24

Rent 1000.

Tax 500

Mortgage 850

Loss: 450/m

 

 

It's hard to argue with your figures,although it won't be fully implemented until 2020 and many may be basic rate tax payers.

I think we'll see a lot of the 1 and 2 house BTLers try and cling on for the capital gain or at least try not to take a loss.

I've traded a lot(shares,optiosn etc),am used to taking losses, profits,break evens.The guys I know who have 1 or 2 BTLs brought in the last ten/twelve years will struggle to come to terms with taking a loss.I suspect we may well see margin calls coming into play for these guys as the banking system eats it's young to survive.

The wealthier end of the BTL investor brigade I know, all stopped buying when yields went sub double digit around 2005/6.It's going to be an epic mess.Says a lot that we've got so many HPCers bigging up the viability of 5% gross yields in a S24 world.

Like I said,I know a few 1+2 BTL types and generally they're not that switched on.A couple didn't even know what S24 was we last chatted,which tells me all I need to know.

Edited by Sancho Panza

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“This is likely to constrict rental supply in the capital and lead to rents increasing again, so now would be a good time for prospective tenants to act, before this happens.”

 

Sorry, but WT actual F are 'prospective tenants'...?

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1 hour ago, spyguy said:

I think you are wrong.

The previous crashes involved OO paying too much for houses ,taking on too much debt.

The majority of the houses sold in the last 15 years have gone to 'investors', buying BTL with mortgages.

The dynamics are totally different.

We are likely to get ~10 years stock dumped on the market in a year or so.

And this market is down to ~20% of sales in a 'normal' pre 2004/no BTL market.

 

Not sure that's the case:

House purchase lending to home-buyers increased slightly month-on-month in December totalling 55,600 loans. This was up 1% compared to November with the value of these loans totalling £9.3bn, a rise of 3%. Compared to December 2013, the number of loans decreased by 5% and the value of lending by 1%. 

  • First-time buyers saw a month-on-month lending increase, with 26,100 first-time buyer loans in December - up 3% on November, but 3% down on December 2013. By value, £3.8 billion was advanced to first-time buyers in December - 6% up on November but unchanged compared to December 2013.
  • The number of loans advanced to home movers was 29,500, the same as November but down 8% on December 2013. By value, lending to movers totalled £5.5 billion, up 2% on November but 2% down on December 2013.
  • Remortgage lending activity saw a decline month-on-month in December with the number of remortgage loans totalling 22,300. This was 7% down on November and 13% down on December 2013. The value of these loans (£3.4 billion) was down 6% on the previous month and down 11% on December the previous year.
  • Buy-to-let loans totalled 17,300 in December, unchanged from November but up 18% compared to December 2013. The total value of these loans (£2.5bn) was up 4% month-on-month and up 32% compared to December 2013

From the CML, granted there will be cash buyers but probably evens out in both categories OO and BTL

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20 minutes ago, Sancho Panza said:

It's hard to argue with your figures,although it won't be fully implemented until 2020 and many may be basic rate tax payers.

I think we'll see a lot of the 1 and 2 house BTLers try and cling on for the capital gain or at least try not to take a loss.

I've traded a lot(shares,optiosn etc),am used to taking losses, profits,break evens.The guys I know who have 1 or 2 BTLs brought in the last ten/twelve years will struggle to come to terms with taking a loss.I suspect we may well see margin calls coming into play for these guys as the banking system eats it's young to survive.

The wealthier end of the BTL investor brigade I know, all stopped buying when yields went sub double digit around 2005/6.It's going to be an epic mess.Says a lot that we've got so many HPCers bigging up the viability of 5% gross yields in a S24 world.

Like I said,I know a few 1+2 BTL types and generally they're not that switched on.A couple didn't even know what S24 was we last chatted,which tells me all I need to know.

Well property is not liquid asset like shares or stocks. In case of downturn everyone will try to sell but it take more time compared to others assets.

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20 minutes ago, Greg Bowman said:

Not sure that's the case:

House purchase lending to home-buyers increased slightly month-on-month in December totalling 55,600 loans. This was up 1% compared to November with the value of these loans totalling £9.3bn, a rise of 3%. Compared to December 2013, the number of loans decreased by 5% and the value of lending by 1%. 

  • First-time buyers saw a month-on-month lending increase, with 26,100 first-time buyer loans in December - up 3% on November, but 3% down on December 2013. By value, £3.8 billion was advanced to first-time buyers in December - 6% up on November but unchanged compared to December 2013.
  • The number of loans advanced to home movers was 29,500, the same as November but down 8% on December 2013. By value, lending to movers totalled £5.5 billion, up 2% on November but 2% down on December 2013.
  • Remortgage lending activity saw a decline month-on-month in December with the number of remortgage loans totalling 22,300. This was 7% down on November and 13% down on December 2013. The value of these loans (£3.4 billion) was down 6% on the previous month and down 11% on December the previous year.
  • Buy-to-let loans totalled 17,300 in December, unchanged from November but up 18% compared to December 2013. The total value of these loans (£2.5bn) was up 4% month-on-month and up 32% compared to December 2013

From the CML, granted there will be cash buyers but probably evens out in both categories OO and BTL

There's no good figures.

In the areas I follow, OO/FTB fell off in 2002ish. The number of transaction dropped and the majority of buyers were IO BTLers.

They have been the major buyer for almost 15 years now, not just a recent blip.

There's going to be more BTL houses than the banks can bothered to find out about - liars loan, BS OO mortgages.

 

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Like it isn't an epic mess of hardship for many now?

If it happens to the BTLers, then great.

10 minutes ago, LondonBooming said:

Well property is not liquid asset like shares or stocks. In case of downturn everyone will try to sell but it take more time compared to others assets.

Houses can still be sold quite quickly.

They will likely take longer time to sell for those holding out for mad-gainz extreme, if if if market turns.

However those owners can't do anything about what some of their neighbours decide to accept, in order to sell.

Late 2012, I wish I had bought... inheritor cut and cut and cut asking price, then took a whopping below offer from an FTB.   He just wanted the money.  Market had cooled just a bit, and inheritor just wanted the money on the house, located far from where he lived.   The one positive is it sold to an FTB.

Then came HTB which totally created sentiment change, especially in the BTLers who decided 'not enough houses' and Gov going to help buyers pay even more with schemes.  BTLer double down.

Quote

Markets are driven at the margin. They’re driven by people who have to buy or people who have to sell.

So when you get to the point when there are people who must sell, and that will come, then prices fall across the board because not many people have to be forced to sell at a low price to push values down.

Although admittedly you need more than one isolated case where a seller accept much lower than peak price, to bring down wider values.  You need a few, but you don't need that many sales in any area, at lower prices, to bring down value for all owners.   That's how prices fell in 2008-09.   Owners accepting lower prices than houses were selling for in the past, and neighbours houses 'reportedly' went down in value at same time.  Not that many of them believed it.  Their house special with no need to sell.  Only other people's homes falling in value.   And in blink of an eye, monetary policy and stimulus, and it was BTLer double down again, and prices climbing back up strongly.  Cooling a little in 2012, then powering ahead after HTB announced.

Quote

 

The reasons why bubbles persist is not because people don't appreciate they are bubbles - they all know they are bubbles - think back to the Dot Com, there's a good example. We all knew it was a bubble; we didn't care.

The reason we didn't care is very rational; we didn't care because you could make more money in the near term - actually 2 reasons - you could make more money in the near term than you could make in a normal market over 5 years, and two, "It didn't matter because I would get out in time'.

The point about a market is you can't. Mathematically you can't. Only a minority of people can get out in time. By definition.

(To the assumption Gov would stop it with everything it can)... You have remarkable faith in the ability of governments.

 

 

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26 minutes ago, Greg Bowman said:

Not sure that's the case:

House purchase lending to home-buyers increased slightly month-on-month in December totalling 55,600 loans. This was up 1% compared to November with the value of these loans totalling £9.3bn, a rise of 3%. Compared to December 2013, the number of loans decreased by 5% and the value of lending by 1%. 

  • First-time buyers saw a month-on-month lending increase, with 26,100 first-time buyer loans in December - up 3% on November, but 3% down on December 2013. By value, £3.8 billion was advanced to first-time buyers in December - 6% up on November but unchanged compared to December 2013.
  • The number of loans advanced to home movers was 29,500, the same as November but down 8% on December 2013. By value, lending to movers totalled £5.5 billion, up 2% on November but 2% down on December 2013.
  • Remortgage lending activity saw a decline month-on-month in December with the number of remortgage loans totalling 22,300. This was 7% down on November and 13% down on December 2013. The value of these loans (£3.4 billion) was down 6% on the previous month and down 11% on December the previous year.
  • Buy-to-let loans totalled 17,300 in December, unchanged from November but up 18% compared to December 2013. The total value of these loans (£2.5bn) was up 4% month-on-month and up 32% compared to December 2013

From the CML, granted there will be cash buyers but probably evens out in both categories OO and BTL

Point taken.

I think it's safe to say the more marginal buyers over the last 15 years have been BTLers.Home owners are more committed for a variety of reasons,hence the differences in risk weighting.

As ever though,markets move at the margins first.I can't foresee a drop in prices that isn't centred on BTL.

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29 minutes ago, LondonBooming said:

Well property is not liquid asset like shares or stocks. In case of downturn everyone will try to sell but it take more time compared to others assets.

Never said it was.That's the main reason I wouldn't touch it given the a variety of other more liquid means to get exposure to residential housing.

The BTL market is made up of many different types of players.Some will sell(and already are) without much hesitation. Others will cling on in the face of falling asset prices for the simple reason that many less active market players emotionally anchor to prices.

For BTLers it's a cashflow thing.For most others,it's an asset thing.A lot of the smaller BTLers will take time to adjust to the notion of a loss and will struggle to take it in comparison to more active players who will exit first and probably make the most/lose the least.

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  • 297 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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