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Stupid Question Re Renting

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should interest rates rise/second homes become subject to increased tax etc. - what would stop landlords from simply increasing the rents - surely if the preponderance of landlords hold their nerve and act in unison then the problem will be passed on to tenants, therby making it even harder to save/buy?

there is probably a simple explantion that i have missed - possibly that many landlords will look to cash-in should the situation take a turn for the worse...

:blink:

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should interest rates rise/second homes become subject to increased tax etc. - what would stop landlords from simply increasing the rents - surely if the preponderance of landlords hold their nerve and act in unison then the problem will be passed on to tenants, therby making it even harder to save/buy?

there is probably a simple explantion that i have missed - possibly that many landlords will look to cash-in should the situation take a turn for the worse...

:blink:

The simple answer is that although people might be willing to pay reckless amounts for mortgages they won't do the same for rent. Over the past few years, disposable incomes have stopped rising and unemployment has stopped falling. As a result of this, rents have gone sideways (despite the huge increase in property values). In all likelihood, rents will fall steadily as government spending is cut back.

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should interest rates rise/second homes become subject to increased tax etc. - what would stop landlords from simply increasing the rents - surely if the preponderance of landlords hold their nerve and act in unison then the problem will be passed on to tenants, therby making it even harder to save/buy?

there is probably a simple explantion that i have missed - possibly that many landlords will look to cash-in should the situation take a turn for the worse...

:blink:

You could be right. And a fall in prices triggered by IR rises will not make it much easier for buyers either for obvious reasons.

Catch 22

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should interest rates rise/second homes become subject to increased tax etc. - what would stop landlords from simply increasing the rents - surely if the preponderance of landlords hold their nerve and act in unison then the problem will be passed on to tenants, therby making it even harder to save/buy?

there is probably a simple explantion that i have missed - possibly that many landlords will look to cash-in should the situation take a turn for the worse...

:blink:

The large amount of BTL landlords out there, means that market forces apply and therefore they are in competition with other BTL landlords for renters. After all its a free market.

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The simple answer is that although people might be willing to pay reckless amounts for mortgages they won't do the same for rent. Over the past few years, disposable incomes have stopped rising and unemployment has stopped falling. As a result of this, rents have gone sideways (despite the huge increase in property values). In all likelihood, rents will fall steadily as government spending is cut back.

i agree - but guess the difference is that you don't have much choice unless you want to live on the streets!

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You could be right. And a fall in prices triggered by IR rises will not make it much easier for buyers either for obvious reasons.

Catch 22

What obvious reasons?

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This is why rental prices will not go up to reflect increased costs to landlords (posted on another thread).

QUOTE(warwickbloke @ Jul 20 2006, 07:40 PM)

If high tax were placed on BTL ownership, this extra cost will be passed on to the tenants.

The result will be a different section of society being penalised.

This is totally wrong, I'm afraid. It's time to squash this flawed logic once and for all.

Rent prices are driven directly by what people can afford, and local market condiditions. Supply and demand are much more closely interwoven than for sale prices, because you remove the expectation of capital returns. Quite simply this is the real value that the market sets on residing in a property of a certain size. Yes supply and demand do make prices fluctuate, but the real cost of providing that property for rent doesn't have that much direct influence on the monthly rental.

And the rental price bears very little correlation to current sale prices of houses. In the mid nineties, renting was more expensive than buying. The reasoning for this was that it was perceived that the landlord had all the household maintenance to take care of, plus house insurance and risk. And he would make a rental return. Where I was living at the time, a house would have cost you about 60k to buy and to rent it each month was costing 600 pcm.

Then interest rates came down, making sale prices seem a lot cheaper compared to rentals. For a while, rental prices plummeted because people started to buy (which was cheaper). Landlords had to suffer losses for a while.

Then as prices rose again, there reached some sort of equilibrium where rentals and sale prices were more in balance (maybe late nineties)

These days the sale price would be about 210k in the area that I am thinking of. The rental price would now be about 700pcm. By your reasoning the rental should be about 2000pcm. Are landlords managing to pass on the increased cost of ownership? Answer: no. The rents are going up or down independent of that.

Do rents come down when interest rates come down? Answer:no. The landords make more profit.

Do rents go up when interest rates go up? Answer: no. Landlords make less profit.

Additional taxes on BTL will not be passed onto tenants. The market will dictate the price as it always has, and the market doesn't care if the landlord makes a profit or a loss.

Please someone argue with me. I have lived through this and experienced it first hand. If all you BTL landlords are relying on passing on increased costs to your tenants, think again!

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i agree - but guess the difference is that you don't have much choice unless you want to live on the streets!

If rents started to rise singificantly, I would move to a smaller house. I would also have no hesitation in moving abroad. I am not prepared to pay a larger percentage of my income for something I have no stake in. I do not want to live in poverty.

There are more than enough properties in this country to house the population. If interest rates go up, landlords will get squeezed. In the final analysis they are timid about putting up rents because they are scared of voids.

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Rents are set by supply/ demand, NOT by costs. Increasing costs may have upward pressure on rents, as LL decide to sell up, reducing supply.

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When I was renting from a BTL landlord in the mid nineties, he was getting hammered in interest and wanted to put up the rent. I said "okay, I'll just move out. I was thinking that rents have gone down and I might be able to do better in this area anyway" Not surprisingly he backed down. He almost offered me a rent reduction just to keep us in, because we were respectable, always paid the rent, and weren't likely to trash the place. He had been burnt before by nightmare tenants. This is my advice if your landlord tries to unreasonably put up the rent. Don't accept an increase in rent because his costs have gone up! If rates went down, you don't get a rent rebate. Don't get walked over - stand your ground. Any sane landlord will hang onto you at the moment, because with all the new amateur BTL landlords, we are getting ready for a lot of voids.

In the mid nineties, he couldn't sell except at a loss from the 80s, and there was a glut of rental property. It's amazing how quickly and radically sentiments change over time.

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I know some you loathe and despise BLT landlords (but hey thats ok) - but they do provide the market with plenty of rentable property - not everyone wants to buy in the short term - ten years ago nobody aspired to rent in the uk - and rental property was shite - I remember my crappy student digs in 80s Manchester - now there is a vast supply of affordable, decent property to rent - WYFP!

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Rents are set by supply/ demand, NOT by costs. Increasing costs may have upward pressure on rents, as LL decide to sell up, reducing supply.

i disagree, increasing costs would put pressure on the new LL's not the rents.

those LL's who are longer in the business can ride the storms and are the ones who can compete at lower prices forcing out the LL's who are stretched.

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What obvious reasons?

£150k at 4.5% base rate % is cheaper than £130 at 5.5% base rate.

I'm not saying that a crash would only drop this amount or that IR would rise as much as that but the difference wouldn't be as substantial as some may suggest.

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My previous LL wanted to put the rent up. We asked hime (via the agent) for his reasons, his reply was, "because we haven't for the last few years. The agent initially was with the LL until we said, "Fine, we will not be renewing our contract", then they started to tell the LL that he could be making a mistake. We now live in a much bigger home, with parking and in a better area, for the same amount that the LL of our old place wanted to charge us for a tiny terrace with no parking and a Chav problem".

We live very close to our old place (we moved about 18 months ago), in that time the property has been empty (I think someone did live there for a few months). My old neighbour told me that the place was broken into by the local Chavs and the LL now has to make the place look occupied (which means him visiting every few days).

Luckily my new LL has a bit more sence.

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The simple answer is that although people might be willing to pay reckless amounts for mortgages they won't do the same for rent. Over the past few years, disposable incomes have stopped rising and unemployment has stopped falling. As a result of this, rents have gone sideways (despite the huge increase in property values). In all likelihood, rents will fall steadily as government spending is cut back.

Rents are already falling. I'm paying same rent as 3 years ago. That's a fall of around 9-10% over the last 3 years in real terms.

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Rents are already falling. I'm paying same rent as 3 years ago. That's a fall of around 9-10% over the last 3 years in real terms.

they certaintly are.

heres an extract from an interview in the FT Renting Special last weekend headed 'All aboard the BTL Boom'

"Certainly there is an element of risk but it is not huge. You can sell up if it goes wrong. But it has got more difficult over time because so many peopleare now doing buy-to-let, rents have come down. Four years ago I was getting £950 monthly rent for the two-bedroom flat. Now I'm getting £799."

Edited by debtfree

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Please someone argue with me. I have lived through this and experienced it first hand. If all you BTL landlords are relying on passing on increased costs to your tenants, think again!

Bearwithaconscience , no one can argue with your post as you are 100% correct in what you have written .

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they certaintly are.

heres an extract from an interview in the FT Renting Special last weekend headed 'All board the BTL Boom'

"Certainly there is an element of risk but it is not huge. You can sell up if it goes wrong. But it has got more difficult over time because so many peopleare now doing buy-to-let, rents have come down. Four years ago I was getting £950 monthly rent for the two-bedroom flat. Now I'm getting £799."

Does anyone else find it mind-boggling that the FT is printing this in a BTL special entitled "All board the BTL boom"?

Potential BTL investor: "Let me see - thinking of investing in BTL, shall I do it?"

Expert advice : "Well let's see, rents are coming down. Four years ago it was 950 pcm. Now 799 pcm."

Potential BTL investor: "Well, with figures like that, what am I waiting for? Sign me up"

Imagine reading an investment bulletin on stocks in a company:

"Profits have come right down, dividends at 90% of the levels seen 4 years ago. Prices meanwhile have rocketed. Now is the time to buy, don't miss the boat!!!!"

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£150k at 4.5% base rate % is cheaper than £130 at 5.5% base rate.

I'm not saying that a crash would only drop this amount or that IR would rise as much as that but the difference wouldn't be as substantial as some may suggest.

As I stated elsewhere on this forum, the only big winners will be those with fat wallets and no need of a mortgage. That would be str's and pro btl's that manage to get out in time. I believe any crash will be fired by the pro btl's offloading stock.

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Does anyone else find it mind-boggling that the FT is printing this in a BTL special entitled "All board the BTL boom"?

Potential BTL investor: "Let me see - thinking of investing in BTL, shall I do it?"

Expert advice : "Well let's see, rents are coming down. Four years ago it was 950 pcm. Now 799 pcm."

Potential BTL investor: "Well, with figures like that, what am I waiting for? Sign me up"

Imagine reading an investment bulletin on stocks in a company:

"Profits have come right down, dividends at 90% of the levels seen 4 years ago. Prices meanwhile have rocketed. Now is the time to buy, don't miss the boat!!!!"

It was called a 'Renting Special' not a BTL special.

They were bullish towards renting and not buying giving many examples of people who now rent all over the world from NY to HK or London. It was a good read with about 6 articles including a group of young BTL's, high flyers who move cities and always rent, a self made millionare who still rents, and 4 working professionals who all rent together in a chelsea town house because they believe in quality of life.

one good quote from the NY millionare

"Its a passive investment since there's nothing one can do to improve the market, why not take that moneyand do something more agressive ? I once lived in a condo, sold it to move into a rental, then put the profit I made into my business"

another good quote

"People think you need to buy something in order to settle down. But no, you don't"

Edited by debtfree

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As I stated elsewhere on this forum, the only big winners will be those with fat wallets and no need of a mortgage. That would be str's and pro btl's that manage to get out in time. I believe any crash will be fired by the pro btl's offloading stock.

Quite right. Having a smaller mortgage with higher IR is not much better than a high mortgage with a lower IR.

Whoever has no mortgage will beneift the most if a crash happens.

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Apologies - got the wrong end of the stick. Still a true reflection on whether to invest in BTL any time soon though.

No Problem.

Maybe it would have been clearer if I added in what was under the 'All aboard the BTL boom'

A new generation of 'amatuer' landlords owns property for the income. But asks Ben West, is it worth it ?

I think this is great news that the FT is printing articles like this. Its very bullish for renting and bearish for property prices.

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When I was renting from a BTL landlord in the mid nineties, he was getting hammered in interest and wanted to put up the rent. I said "okay, I'll just move out. I was thinking that rents have gone down and I might be able to do better in this area anyway" Not surprisingly he backed down. He almost offered me a rent reduction just to keep us in, because we were respectable, always paid the rent, and weren't likely to trash the place. He had been burnt before by nightmare tenants. This is my advice if your landlord tries to unreasonably put up the rent. Don't accept an increase in rent because his costs have gone up! If rates went down, you don't get a rent rebate. Don't get walked over - stand your ground. Any sane landlord will hang onto you at the moment, because with all the new amateur BTL landlords, we are getting ready for a lot of voids.

In the mid nineties, he couldn't sell except at a loss from the 80s, and there was a glut of rental property. It's amazing how quickly and radically sentiments change over time.

Pretty good indication that housing costs are cyclical.

Seems to be a shift here to how good it is to rent & keep prices low thanks to BTL not being able to get tenants.

A change of sentiment from BTL buying houses & only offering short term tenancies at high prices, this is what has made BTL so unpopular.

It seems now they are useful & 'easy pickings'.

All a matter of opinion.

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  • 301 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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