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Ricky Patel

Is renting in the UK really that bad?

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Hi everyone, I'm looking at a corporate relocation from the US to UK in late Q1 2018. After researching the London housing market on the local sites I stumbled on this place. The vibe I seem to be getting is that renting over there really sucks and generally English people prefer to buy real estate. Correct me if this is wrong.

Is there a reason for that? 

Looking at the price/rent ratio for several apartments in London it seems to be absolute crazy town. I calculated the ratio as 1.8 at several homes I'm looking at, why does the landlord even bother with the stress at that point? Just stick it in the bank.

I'm currently an apartment owner in NYC where yields are historically low, but nothing even close to the places I'm looking at in London.  Despite good capital appreciation on my apartment over the last few years (which could vanish quick) looking back I think overall owning has been net financial negative to me with lost career opportunities etc. So rent vs buy is fairly neutral and I think its the same for most Americans unless you get into fly-over country).

UK looks like a renters paradise though i.e. you can rent very high-end property for relative peanuts ... I know I'm missing part of the picture though (I assume the actual experience of renting there!).

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If you look at it in relative financial terms as you have, I would have to agree with you. Relative to buying, renting is quite cheap right now. This is not because rent is cheap, but because London housing as an asset is in a bubble of tulip proportions. Landlords only bother with such low yield because historically most of their financial gain has come from capital appreciation. Since they're driving by looking only in the rear view mirror, most expect this to continue.

In non-financial terms, being a tenant can be a rubbish experience because short-term tenancies are the norm, landlords try to hold-up new tenants with rent increases knowing that there is a significant cost in moving, and they can be slow to do repairs. These problems are pretty big at the low end. At the high end, the buyer can call the shots. I rent in the GBP2500-3000 per month price bracket. Repairs are done swiftly and rental prices have been going down so it's a buyer's market. I have had no trouble agreeing a three year contract. Finally, if you have children, you can easily move into the catchment area of a top-notch state school that would save you private school fees the equivalent of half of your rent (even for an expensive place). Once they're in, you can move and nobody will kick them out.

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A lot of landlords will have bought their properties some time ago - prices have soared since about 2010, never mind the previous 10 years or so - so their returns will still be good relative to capital outlay. 

2 bed flats in London - in OK but not prime areas - that could easily have sold for under £100k in the late 90s and were selling for £250-275k in 2010-ish, are now routinely priced at £500k+.  

Nobody in their right mind would buy at that sort of price now, with a view to renting it out. 

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With renting you can be subject to excessive upfront costs (which the Govt keeps telling us they intend to abolish one day). Dealing with agents is unpleasant. They lie as they breath and try and force you into making quick decisions on the spot. 

It's not uncommon for a rental agent to try and take a deposit off you before you have seen the contract to rent a flat. Then they will try and charge you exorbitant rates for referencing and incidentals. It's a war of nerves negotiating right from the start. This never stops and the agent tries to scam more fees at every subsequent opportunity. 

Once you are in a rented property you can be trapped. Some London developments are becoming "party" magnets with groups hiring a flat for a weekend for a party. This makes life miserable for anyone living in the same block. It's happened to me. Once you sign a contract you can get trapped in somewhere damp or discover the block is just about to be covered in scaffolding for the entire time of your lease (happened to me) and then you face a legal battle for redress.

If you are buying a property you have more time to find these things out before you move in.

When renting there is the (sometimes) battle as you discover nothing works in your new rented flat and the LL refuses to repair and the constant interruptions into your life by the LL's agents who insist on inspecting it or valuing the property or whatever whim s/he has. I've had flats put on the market for sale whilst I was living in them.

Some developments of flats will have absentee overseas landlords and be run by developments agents who have little interest in ensuring things run well or smoothly for the occupants. So changes to lighting, parking and shared amenities can occur at random or the entire development become run-down and neglected with no light bulbs as an example in corridors and shared waste areas full of rats. The flats themselves are "worth" millions...

Renters also face the risk that their LL will default on the mortgage and they will lose their rented home with little in the way of rights or notice.

Edited by Flopsy

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Unlike civilised countries Britain allows no-fault evictions under the famous Section 21 procedure. Only the 6 month AST is legally binding I understand so you could think you're safe with a 3 year tenancy agreement but if the landlord wants to evict you after 11 months there might not be much you could do. Numerous  legal challenges have been launched over the last few years under the Proportionality argument but they keep failing. The last recourse might be if a tenant(s) takes it to the European Court of Human Rights but with Brexit happening I don't know how much longer that's possible :(

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On 29/12/2017 at 10:48, Mrs Bear said:

A lot of landlords will have bought their properties some time ago - prices have soared since about 2010, never mind the previous 10 years or so - so their returns will still be good relative to capital outlay. 

2 bed flats in London - in OK but not prime areas - that could easily have sold for under £100k in the late 90s and were selling for £250-275k in 2010-ish, are now routinely priced at £500k+.  

Nobody in their right mind would buy at that sort of price now, with a view to renting it out. 

There are some buyers who are not in their right mind

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