Jump to content
House Price Crash Forum
Sign in to follow this  
Mr Yogi

House Rent Inflation

Recommended Posts

I last rented a house in 1993 - nearly 15 years ago - so I'm a bit out of touch with the rents that people pay.

However, yesterday I came across the details of a house to rent next door to the one I lived in all those years ago.

House to rent

£625 per month

The thing is, I was paying £450 per month in 1993. So the rent has gone up by 40% in 15 years. Back then, the asking price for a house like this was around £45k. I know, because we were looking to buy one at the time.

The asking price now?

House for sale

Blimey Charlie, it's the same house! £145k

So the asking price has gone up by over 300% in the same period!

I know that this is but one anecdotal example, but to me it says everything you need to know about the overvaluation of property and the state of the BTL market!

Edited by Mr Yogi

Share this post


Link to post
Share on other sites
I last rented a house in 1993 - nearly 15 years ago - so I'm a bit out of touch with the rents that people pay.

However, yesterday I came across the details of a house to rent next door to the one I lived in all those years ago.

House to rent

£625 per month

The thing is, I was paying £450 per month in 1993. So the rent has gone up by 40% in 15 years. Back then, the asking price for a house like this was around £45k. I know, because we were looking to buy one at the time.

The asking price now?

House for sale

Blimey Charlie, it's the same house! £145k

So the asking price has gone up by over 300% in the same period!

I know that this is but one anecdotal example, but to me it says everything you need to know about the overvaluation of property and the state of the BTL market!

It's more than anecdotal that rents and prices have become totally out of line with each other. Unlike price, rent has no speculative element and is as clear an indicator as we're likely to get that prices have to fall significantly at some point. There are so many flats being built that rents could fall too, add a few economic jitters and things could get interesting, but I hope not catastrophic.

Share this post


Link to post
Share on other sites

I was so amazed by your post that I went to look at what I was living in in 1991. A 2 bed first floor flat in Pimlico, London.

Just been on Rightmove and I think I could rent something for £400 that I used to pay £250 per week for. The quality of what I was looking at though was far far above what it was like when I lived there. The nominal prices rise is 60% but that does not take acocunt of the very significant uplift in quality of fixtures and fittings and furnishings.

The RPI has risen by 54.5% since June 2001 so there you are. Over that period 2001 - 2007 rents on flats in the most expensive City in the world have hardly risen by the rate of inflation and the quality of what is on offer has risen significantly. Who said there was a shortage of property? Does not seem to be a shortage when it comes to rents.

One definition of a bubble is when capital values rise so far that they become out of line with the income or any benefit that can be generated for that asset. We are undoubtedly seeing the death throws of the biggest property bubble since the early part of the 20th Century.

Share this post


Link to post
Share on other sites
I was so amazed by your post that I went to look at what I was living in in 1991. A 2 bed first floor flat in Pimlico, London.

Just been on Rightmove and I think I could rent something for £400 that I used to pay £250 per week for. The quality of what I was looking at though was far far above what it was like when I lived there. The nominal prices rise is 60% but that does not take acocunt of the very significant uplift in quality of fixtures and fittings and furnishings.

The RPI has risen by 54.5% since June 2001 so there you are. Over that period 2001 - 2007 rents on flats in the most expensive City in the world have hardly risen by the rate of inflation and the quality of what is on offer has risen significantly. Who said there was a shortage of property? Does not seem to be a shortage when it comes to rents.

One definition of a bubble is when capital values rise so far that they become out of line with the income or any benefit that can be generated for that asset. We are undoubtedly seeing the death throws of the biggest property bubble since the early part of the 20th Century.

So pleased to find your experience the same as mine. I've been checking around today on Rightmove and it seems to be a general phenomena.

Why does anyone buy when they can rent so cheaply?

Edited by Mr Yogi

Share this post


Link to post
Share on other sites
Why does anyone buy when they can rent so cheaply?

Well I do wonder if thats "the plan" but enough with conspiracy theories.

I last rented a 3 bed semi in Leicester over 10 years ago for about £350pcm. The same houses are only about £450/500 now. It seems the new city centre apartments represent the least value, despite increasing massively in supply.

Share this post


Link to post
Share on other sites

Has anyone seen the same house for sale and for rent? Unlikely to be a common scenario, but look at these in Cambridge:

For sale £348,000

http://www.carterjonas.co.uk/residential-p...amp;ret=results

For rent £231 p/w = £1000 p/m

http://www.vebra.com/home/search/vdetails....mp;pid=12360256

An interest-only mortgage @ 6% (being generous) on £348,000 has payments of £1740 p/m

1000 vs 1740 - that's quite huge.

Anyone got comparisons in their area?

Share this post


Link to post
Share on other sites
Who'd like to be my neighbour?

For sale £122,450

To let £450 pcm

Using the same 6% rough and ready guide that would make a IO mortgage £612.25 pcm

Your neighbour probably doesn't have 122450 mortgage outstanding as he presumably bought some time ago, so prob covering mortgage payment

Share this post


Link to post
Share on other sites
What nonsense.

Many surveys are showing rises in rents. Houseprices don't rise by magic. Have you seen Austrailia's rents recently?

Since 2001 I've been on a downwards slope for rent costs, but an upward slope for size and quality of rented house. I propose that these surveys of which you speak are flawed in some fundamental way. Perhaps they're of freak areas subject to special circumstances, or maybe they're written by people pushing BTL mortgages?

Share this post


Link to post
Share on other sites

Sure they are all flawed for years, dispite rising houseprices and every working stiff, you and me included pays £1,300 in taxes to housing benefit landlords which don't pay taxes, to help accomodate unfettered mass immigration and make sure through the large BTL tax breaks in the tax system, since the removal of MIRAS in 2000, houses are always out of reach for ordinary families.

Still disppite all this, since 2001 you have not seen anything to fret about with the 'crash' that seems to be taking some time...

Edited by brainclamp

Share this post


Link to post
Share on other sites
So pleased to find your experience the same as mine. I've been checking around today on Rightmove and it seems to be a general phenomena.

Why does anyone buy when they can rent so cheaply?

Just checked on St Margarets (between Twickenham and Richmond) and it definitely appears that rents haven't really increased since 2002 when I was living there. In the same period house prices have rocketed - a friend of mine just sold a tiny 2 bed terrace for £500k...

Where are all these increases in rent then?

Share this post


Link to post
Share on other sites

Interesting...

house prices inflation much higher than rent inflation is mentionned in the 'Home thruth' research paper. The analyst says that the classical argument that there is a strong demand for housing (driven by immigration, new family structures, ...) is a fallacy, because if there was really a strong demand, rents would increase in a way parallel to house prices. There is a strong demand, but not for housing, for high-returns investment. And this, of course, is not a strong enough reason to justify (sustainably) higher prices.

What has driven high prices is not demand for housing, lack of supply, or any serious fundamental. Just the fact that for a fixed monthly mortgage payment, the amount that someone can borrow has increased (by low rates, extended mortgage duration and loosened lending standards), and so, mechanically, the price that he will be willing to pay to get a house. On the other side, on rental, nobody will ever rent a place they can not afford, so there can be no bubbles on rentals.

Share this post


Link to post
Share on other sites
I last rented a house in 1993 - nearly 15 years ago - so I'm a bit out of touch with the rents that people pay.

Mr Yogi,

Your post also struck a chord with me:

I remember a pal renting out his house in Oldham whilst he went to Australia for a couple of years (must have been late eighties/early nineties). At the time, the rental income seemed an incredible sum that easily covered his mortgage (and rates were much higher then!).

In those days you only seemed to rent in an act of desperation or as a strictly temporary measure. It feels that with today's high property prices we appear to have had a bit of a culture shift where people choose to rent a home out of economical necessity (or in anticipation of a market correction).

Regards

Sox

Edited by Bootsox

Share this post


Link to post
Share on other sites
Sure they are all flawed for years, dispite rising houseprices and every working stiff, you and me included pays £1,300 in taxes to housing benefit landlords which don't pay taxes, to help accomodate unfettered mass immigration and make sure through the large BTL tax breaks in the tax system, since the removal of MIRAS in 2000, houses are always out of reach for ordinary families.

Still disppite all this, since 2001 you have not seen anything to fret about with the 'crash' that seems to be taking some time...

Are you requiring a specific date and time it will happen ? I think your comment reflects the lack of understanding by the general populous of why interest rates are adjusted monthly. Did you know interest rates are not set according to how much of a struggle Mr and Mrs Jones at number 31 are having to pay the mortgage ? No ? I didn't think so. Well that's just like the rest of the populous. And that's why it will creep up on you and the rest of the populous and bite you on the ass. It's just a matter of time as to when you realise it's bitten you on the ass, and that's really down to how well your brain understands that the pain in your ass is not a good sign.

edited for grammar.

Edited by Bill

Share this post


Link to post
Share on other sites
I last rented a house in 1993 - nearly 15 years ago - so I'm a bit out of touch with the rents that people pay.

However, yesterday I came across the details of a house to rent next door to the one I lived in all those years ago.

House to rent

£625 per month

The thing is, I was paying £450 per month in 1993. So the rent has gone up by 40% in 15 years. Back then, the asking price for a house like this was around £45k. I know, because we were looking to buy one at the time.

The asking price now?

House for sale

Blimey Charlie, it's the same house! £145k

So the asking price has gone up by over 300% in the same period!

I know that this is but one anecdotal example, but to me it says everything you need to know about the overvaluation of property and the state of the BTL market!

Rent up 42%, house price up 500% + in Cambridge:

http://www.housepricecrash.co.uk/forum/ind...showtopic=52017

Share this post


Link to post
Share on other sites
house prices inflation much higher than rent inflation is mentionned in the 'Home thruth' research paper. The analyst says that the classical argument that there is a strong demand for housing (driven by immigration, new family structures, ...) is a fallacy, because if there was really a strong demand, rents would increase in a way parallel to house prices. There is a strong demand, but not for housing, for high-returns investment. And this, of course, is not a strong enough reason to justify (sustainably) higher prices.

Thanks! No doubt I'll have to use this argument at a party I'm going to tonight :)

By the way, did you know that if you rent a house in Britain, you're a terrorist and a paedophile, and shows that you have no commitment to anything at all? Or at least you'd think so, judging by the looks on people's faces when I suggest such a thing.

The fundamentals of the British housing market are so out of whack that I would have no problem at all putting down my £550 and saying "I'll take the keys, show me where to pay the money, and see you in a year." The missus would never, ever, EVER consider such a thing. She wants a house whether we can pay for it or not.

It's sheer blind ignorance and panic that is driving the market, from every single person you talk to.

Share this post


Link to post
Share on other sites
Interesting...

house prices inflation much higher than rent inflation is mentionned in the 'Home thruth' research paper. The analyst says that the classical argument that there is a strong demand for housing (driven by immigration, new family structures, ...) is a fallacy, because if there was really a strong demand, rents would increase in a way parallel to house prices. There is a strong demand, but not for housing, for high-returns investment. And this, of course, is not a strong enough reason to justify (sustainably) higher prices.

What has driven high prices is not demand for housing, lack of supply, or any serious fundamental. Just the fact that for a fixed monthly mortgage payment, the amount that someone can borrow has increased (by low rates, extended mortgage duration and loosened lending standards), and so, mechanically, the price that he will be willing to pay to get a house. On the other side, on rental, nobody will ever rent a place they can not afford, so there can be no bubbles on rentals.

This is exactly my take on the supply/demand argument. <_<

Share this post


Link to post
Share on other sites
Your neighbour probably doesn't have 122450 mortgage outstanding as he presumably bought some time ago, so prob covering mortgage payment

So he's decided that he'd rather make 450 a month on whatever level of capital he's got in the property than selling the property and putting that cash to work with NSI at RPI+1.35% or 6%+ with several UK lenders?

If you are going to get into BTL then you should consider it as a business decision and do the maths accordingly. Then again a large percentage of new businesses go bankrupt I believe?

Share this post


Link to post
Share on other sites
What has driven high prices is not demand for housing, lack of supply, or any serious fundamental. Just the fact that for a fixed monthly mortgage payment, the amount that someone can borrow has increased (by low rates, extended mortgage duration and loosened lending standards), and so, mechanically, the price that he will be willing to pay to get a house. On the other side, on rental, nobody will ever rent a place they can not afford, so there can be no bubbles on rentals.

Spot on. Credit loosening and the misuse of IO mortgages have driven the market to the point its at now.

My own bank, who sucked their teeth at lending me £45k as a graduate trainee in 1999 (salary £14.5k), are now offering to lend me up to £190k (salary £38k). I'd have to be a bloody lunatic to take them up on their offer.

My own anecdotal evidence -

rented a 1 bed flat in Leth, Edinburgh in 2000 rental cost approx £450 pcm purchase cost approx £45k.

Rent a much larger 1 bed 1 boxroom flat in Leith, Edinburgh cost £495 pcm (much as it would have been in 2000) purchase cost of comparable flat £150k (cost of it in 2000 would have been about 60k).

Rents in Edinburgh have barely increased at all during the last 7 years (1 beds 400-500 pcm, 2 beds 550-700 pcm).

Share this post


Link to post
Share on other sites
Interesting...

house prices inflation much higher than rent inflation is mentionned in the 'Home thruth' research paper. The analyst says that the classical argument that there is a strong demand for housing (driven by immigration, new family structures, ...) is a fallacy, because if there was really a strong demand, rents would increase in a way parallel to house prices. There is a strong demand, but not for housing, for high-returns investment. And this, of course, is not a strong enough reason to justify (sustainably) higher prices.

What has driven high prices is not demand for housing, lack of supply, or any serious fundamental. Just the fact that for a fixed monthly mortgage payment, the amount that someone can borrow has increased (by low rates, extended mortgage duration and loosened lending standards), and so, mechanically, the price that he will be willing to pay to get a house. On the other side, on rental, nobody will ever rent a place they can not afford, so there can be no bubbles on rentals.

Agreed, prices have risen because people were investing in property not for what it can do for them, but for how much potential growth they can make from it. Rental income covers the interest on their loan.

No investment growth=no money to be made= no point in investing.

Share this post


Link to post
Share on other sites
Guest happy?
Spot on. Credit loosening and the misuse of IO mortgages have driven the market to the point its at now.

My own bank, who sucked their teeth at lending me £45k as a graduate trainee in 1999 (salary £14.5k), are now offering to lend me up to £190k (salary £38k). I'd have to be a bloody lunatic to take them up on their offer.

My own anecdotal evidence -

rented a 1 bed flat in Leth, Edinburgh in 2000 rental cost approx £450 pcm purchase cost approx £45k.

Rent a much larger 1 bed 1 boxroom flat in Leith, Edinburgh cost £495 pcm (much as it would have been in 2000) purchase cost of comparable flat £150k (cost of it in 2000 would have been about 60k).

Rents in Edinburgh have barely increased at all during the last 7 years (1 beds 400-500 pcm, 2 beds 550-700 pcm).

Wouldn't disagree with those sentiments. And it's been many years since I rented also.

However, a quick check in my area shows similar results to others. I rented a 1 bed good quality flat before taking my first mortgage. The house all-in (including local taxes and insurances) was about 50% more than the flat in monthly outgoings. Comparable properties today show rental charge to be approx £500 per month, mortgage alone on similar property to my first purchase about £950-£1000.

This represents a doubling of mortgage costs, where a maximum all-in charge should be around the £750 mark. In a similar situation today I'd be saving my money and reviewing whether to buy a house next spring - or possibly leaving later to allow for more repo properties to become available.

The press are telling us now what most of us have known for months - the lax credit has run its course and it's now a buyers' market. This will only accelerate as BTLs begin to fully appreciate the meaning of a diversified portfolio.

Share this post


Link to post
Share on other sites
What nonsense.

Many surveys are showing rises in rents. Houseprices don't rise by magic. Have you seen Austrailia's rents recently?

The last place I couldn't care less about is Asutralia. Right after "many surveys." My monthly rent increased by £20 during the last 6 years. With such a "performance" it doesn't even matter how much I pay, does it?.. :)

Share this post


Link to post
Share on other sites
prices have risen because people were investing in property not for what it can do for them, but for how much potential growth they can make from it.

Maybe each house on the market should carry a boiler plate to the effect of "minimum average payout on this slot machine is 110%"

I understand it is a legal requirement for a gambling device?

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.