Jump to content
House Price Crash Forum
Sign in to follow this  
pmaupoil

Rents Rise Or Not Rent Rise?

Recommended Posts

I believe we are entering a transition phase where prices still go up in richer regions but with a slower inflation and the other regions already showing signs of relieve(depends on which side you are obvioulsy...). Furthermore, the increase of contradictory property articles and comments from various sources in the last months really reinforce the symptoms.

I have missed the boat at the beginning of 2000 and since then at 32 still rent :-( It is a bit frustrating when you see that everyone around you has a property at that age. To be honest, now I do not regret at all when I see the current situation. I have managed to save some decent money which hopefully will enable me to buy a decent property once a sensible correction occur.

Nevertheless, I have one concern regarding the rate of rents. So far, btl landlords relied on capital growth rather than renting income and I think they never put some pressure on rents increase since they made enough money from hpi which is why rental yields are currently so low. Now, they will little by little realise that their property value is dropping and will start increasing the rents. This could escalate in really high rental increases.

I know you can say that they face fierce competition from oversupply but these btls are a real force in the property market so if they all increase them then we have no choice but accept it...

I only came in the UK mid-90's but I remember at that time that rental yields were really high...

Any views on that?

Share this post


Link to post
Share on other sites

In the text book economy rents are linked to the value of a property which in turn is linked to wages. So it is normal for houses to increase faster than general inflation because wage inflation is a little higher. Yes I agree, if LLs cant rely on capital growth they will try to get more from rents. I think we can argue about the short term, eg I wouldnt like to speculate if you'll be paying more rent this time next year. However in the longterm, yes it is reasonable to expect rents will increase in a stepwise fashion over coming years.

This is one attraction of buying, because (assuming constant IRs) your mortgage repayments stay constant and hence in time you will be paying less each month than renters. This is why in the text book economy it is actually normal for rents to be less than ones mortgage. It makes sense - you are happy to pay more in the short term because in the longterm you will save money.

Certainly where I live, rents have been increasing - very slowly. But they are certainly creeping up. My mortgage repayments are now only a little higher than the equivalent rental, in a year or two they will be less - if only because my overpayments drop the asking amount by £5 or so a time. Wouldnt that be nice if you could give your LL £5 less each month ;)!? (although that party will end when m'fixed rate eventually runs out. Maybe!)

Share this post


Link to post
Share on other sites
My mortgage repayments are now only a little higher than the equivalent rental, in a year or two they will be less - if only because my overpayments drop the asking amount by £5 or so a time. Wouldnt that be nice if you could give your LL £5 less each month ;)!? (although that party will end when m'fixed rate eventually runs out. Maybe!)

You're much better off decreasing the term of your mortgage, which will increase your monthly repayments, than you are overpaying. As things stand, you're paying a load of unnecessary interest. Did you not get a flexible fixed rate mortgage that allows you to do this?

Share this post


Link to post
Share on other sites
You're much better off decreasing the term of your mortgage, which will increase your monthly repayments, than you are overpaying. As things stand, you're paying a load of unnecessary interest. Did you not get a flexible fixed rate mortgage that allows you to do this?

Remember, Orbitroll claims to have spent years saving for a deposit, while house prices were increasing 10% or more each year; financially speaking, he's not the smartest kid on the block.

Share this post


Link to post
Share on other sites
I know you can say that they face fierce competition from oversupply but these btls are a real force in the property market so if they all increase them then we have no choice but accept it...

No, tenants can just refuse to pay more.

A friend of mine did this a few years ago - landlord said "pay me an extra £50 per month", and he just said "no, keep the rent the same or I will move out". If he had moved out, and it had taken just one month for the landlord to find a new tenant, then he would have lost as much money as the £50 increase would have made him over a year.

This is made all the easier when there's a glut of rental property around.

The way I see it, rents can go up or house prices can come down, but eventually the P/E of housing is going to revert to trend, because nothing fundamental has changed in the housing market. Rising rents invariably leads to a wage/price spiral, and the government and the Bank will do whatever they can to stop that happening.

Share this post


Link to post
Share on other sites
Remember, Orbitroll claims to have spent years saving for a deposit, while house prices were increasing 10% or more each year; financially speaking, he's not the smartest kid on the block.

or he's just an inveterate bull$hitter.

Meanwhile, in the real world, my current landlord has jacked the asking rent up for the place we are about to leave. Funnily enough, he's had no takers so far.

Share this post


Link to post
Share on other sites
or he's just an inveterate bull$hitter.

I think orbitroll's a sixth former with an imaginary house. His mental age often comes across as being late teens.

Share this post


Link to post
Share on other sites
or he's just an inveterate bull$hitter.

Meanwhile, in the real world, my current landlord has jacked the asking rent up for the place we are about to leave. Funnily enough, he's had no takers so far.

Yes it will, like always, be market forces that set the price.

Share this post


Link to post
Share on other sites
Certainly where I live, rents have been increasing - very slowly. But they are certainly creeping up. My mortgage repayments are now only a little higher than the equivalent rental, in a year or two they will be less - if only because my overpayments drop the asking amount by £5 or so a time. Wouldnt that be nice if you could give your LL £5 less each month ;)!? (although that party will end when m'fixed rate eventually runs out. Maybe!)

Actually I'd agree with much of that. Rents have risen slightly where I am, annoying as it may be. On the other hand, had I bought in 2004 like I got close to doing, I would have been stretching myself right to the limit, and would be now have ended up paying even more through interest rate increases and the end of any fixed rate payments I would have had. Frankly, I think if I'd have bought I'd be up shit creek by now, financially-speaking.

Share this post


Link to post
Share on other sites
My mortgage repayments are now only a little higher than the equivalent rental, in a year or two they will be less - if only because my overpayments drop the asking amount by £5 or so a time. Wouldnt that be nice if you could give your LL £5 less each month ;)!? (although that party will end when m'fixed rate eventually runs out. Maybe!)

You're confused here I'm afraid. If your repayments are dropping by £5 a month you are overpaying by £1200 a month on a 5% mortgage. I imagine this is plausible if you're well paid.

However, you're paying more than the average rental, and admit you have been for ages. Imagine if instead you could instead put £1500 a month instead into an index-linked bond at 6.5% interest, tax-free. You wouldn't be giving away £5 less, you'd be earning £8 more!

Share this post


Link to post
Share on other sites
In the text book economy rents are linked to the value of a property which in turn is linked to wages. So it is normal for houses to increase faster than general inflation because wage inflation is a little higher.

There is one fundimental difference between HPI and rent inflation: Nobody rents a flat speculativley!

HPI is a positive feedback cycle, rapid house price growth encourages more speculation, which in turn feeds into rapid growth.

Rents on the other hand follow the simple laws of price elasticity. People are not encoraged to rent more houses when the rent goes up, in fact the reverse is true, increasing rents choke off demand. Renters move to smaller properties, or into lodgings, or back to the parents. This is perhaps the reason why large houses are now so cheap to rent, relative to selling prices.

The imigration factor is also at the stops. Almost all new migrants already live as lodgers or in crowded HMOs, and the back to the parents option takes them out the market altogether........any significnat increase in rents must therefore result in either increased wage demands, increasing inflation and consequently raising IRs; or a mass exodous, reducing demand

Share this post


Link to post
Share on other sites
Guest d23
I believe we are entering a transition phase where prices still go up in richer regions but with a slower inflation and the other regions already showing signs of relieve(depends on which side you are obvioulsy...). Furthermore, the increase of contradictory property articles and comments from various sources in the last months really reinforce the symptoms.

I have missed the boat at the beginning of 2000 and since then at 32 still rent :-( It is a bit frustrating when you see that everyone around you has a property at that age. To be honest, now I do not regret at all when I see the current situation. I have managed to save some decent money which hopefully will enable me to buy a decent property once a sensible correction occur.

Nevertheless, I have one concern regarding the rate of rents. So far, btl landlords relied on capital growth rather than renting income and I think they never put some pressure on rents increase since they made enough money from hpi which is why rental yields are currently so low. Now, they will little by little realise that their property value is dropping and will start increasing the rents. This could escalate in really high rental increases.

I know you can say that they face fierce competition from oversupply but these btls are a real force in the property market so if they all increase them then we have no choice but accept it...

I only came in the UK mid-90's but I remember at that time that rental yields were really high...

Any views on that?

Rents increased during the last crash and (unless it's different this time :rolleyes: ) will no doubt do so again

I've resigned myself to not buying until a good few years into a crash as higher IR's and job insecurity (brought on by a HPC / recession) will most likely make buying not that attractive for a long while. Having my rent increasing during that time will be no fun but ultimately in a few years a HPC should result in a decent priced home for me and my family; waiting till that point isn't going to be a barrel of laughs tho.

Share this post


Link to post
Share on other sites
Nevertheless, I have one concern regarding the rate of rents. So far, btl landlords relied on capital growth rather than renting income and I think they never put some pressure on rents increase since they made enough money from hpi which is why rental yields are currently so low. Now, they will little by little realise that their property value is dropping and will start increasing the rents. This could escalate in really high rental increases.

It isn't up to landlords, it is up to the market.

I had written a longer reply but actually I've realised it would be a bit redundant.

What landlords "want" or even "need" is neither here nor there, they are just people selling a service like anyone else.

Share this post


Link to post
Share on other sites
It isn't up to landlords, it is up to the market.

I had written a longer reply but actually I've realised it would be a bit redundant.

What landlords "want" or even "need" is neither here nor there, they are just people selling a service like anyone else.

:o

This is a very sensible reply :o

Are the posters and the replies getting mixed up?

Share this post


Link to post
Share on other sites

If rents rise to equal that of a mortgage payment, then what is the point of paying a buy-to-let'ers mortgage ?

One may as well buy a house. That and the fact that if one cannot afford a mortgage payment then how the heck can one afford an equivalent rental ?? I pointed that out in response to one bull's argument on here that rents will rise to almost match mortgage payments, but I don't think it got a reply.

It's a simple matter that the majority of buy-to-letters are going to have to compete not only with each other, but the cost of servicing a mortgage. i.e. landlords will HAVE to keep rentals below mortgage payments, subsidise their tenant's or how else will they keep their tenant's ?

Edited by Bill

Share this post


Link to post
Share on other sites
I know you can say that they face fierce competition from oversupply but these btls are a real force in the property market so if they all increase them then we have no choice but accept it...

This assumes Btlers act like a well-organised cartel.

In fact they are mostly a bunch of greedy, selfish individuals and a lot of them are (to put it politely) financially naive. Once the going gets tough it will be dog eat dog with rents chasing each other down and down, then a scrummage for the door when financial meltdown is staring them in the face.

A bloodbath. :o

The more experienced and financially secure will batten down the hatches and weather the storm with substantially lower rents and a healthier respect for the people paying (some) of their mortgage.

Edit for typo

Edited by time_and_tide

Share this post


Link to post
Share on other sites
If rents rise to equal that of a mortgage payment, then what is the point of paying a buy-to-let'ers mortgage ?

One may as well buy a house.

You can't end up with negative equity with the rent. Your maximum liability is a tiny deposit.

I'd rather be pay-as-you-going a bit more than sign up to a life-long contract with no backout clause on depreciating asset.

Edited by refusnik

Share this post


Link to post
Share on other sites
This assumes Btlers act like a well-organised cartel.

In fact they are mostly a bunch of greedy, selfish individuals and a lot of them are (to put it politely)

Ever been in a share where the price rises, and you know if everyone holds on it will go up more and more, but they sell.

That will be the same with BTLers if they organise a cartel!!

Share this post


Link to post
Share on other sites
:o

This is a very sensible reply :o

Are the posters and the replies getting mixed up?

I think that was a little harsh, I am a veritable font of wisdom on an at least semi-regular basis. :angry:

Share this post


Link to post
Share on other sites
I believe we are entering a transition phase where prices still go up in richer regions but with a slower inflation and the other regions already showing signs of relieve(depends on which side you are obvioulsy...). Furthermore, the increase of contradictory property articles and comments from various sources in the last months really reinforce the symptoms.

I have missed the boat at the beginning of 2000 and since then at 32 still rent :-( It is a bit frustrating when you see that everyone around you has a property at that age. To be honest, now I do not regret at all when I see the current situation. I have managed to save some decent money which hopefully will enable me to buy a decent property once a sensible correction occur.

Nevertheless, I have one concern regarding the rate of rents. So far, btl landlords relied on capital growth rather than renting income and I think they never put some pressure on rents increase since they made enough money from hpi which is why rental yields are currently so low. Now, they will little by little realise that their property value is dropping and will start increasing the rents. This could escalate in really high rental increases.

I know you can say that they face fierce competition from oversupply but these btls are a real force in the property market so if they all increase them then we have no choice but accept it...

I only came in the UK mid-90's but I remember at that time that rental yields were really high...

Any views on that?

Rents have been flat purely due to supply and demand, there has never been so much rental property avaliable, if you go back 10 or more years rents were almost on par with today and previous to that rents were much higher in real terms and for places in much crappier condition than what is now the average. If Capital gains halts its progress I assume quite a few landlords will get out and this will reduce the rental pool overall. This happened in Australia last year and rents there have gone up substantialy, (BTLers are now flooding back into the market) vaccancy rates in OZ are at the lowest since just after WW2 when 4 or 5 years ago they were the highest ever. Friend over there who has 2 BTL flats in the cheapest areas of the city (Melbourne) has put his rents up by 25% this year. Maybe this is what is in store for us here, this of course will not be good for FTB'ers as they will be stuck between a rental rock and a buying hard place, bit like what we experienced in the late 80's.

Share this post


Link to post
Share on other sites
You can't end up with negative equity with the rent. Your maximum liability is a tiny deposit.

I'd rather be pay-as-you-going a bit more than sign up to a life-long contract with no backout clause on depreciating asset.

I was attempting to give a counter-argument to the bull statement that 'rents will rise to meet mortgage payments'. In which case if it's no cheaper to rent then you may as well pay for a house, negative equity or not. At least you'll have something. (eventually).

I just can't see rents rising with so much rental accommodation in the market. If it gets too expensive people will move or share.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 354 The Prime Minister stated that there were three Brexit options available to the UK:

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.