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Rent – Supply, Demand And Affordability

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I hear a lot about supply and demand in the rental market and how this will push up the price of renting. However, affordability is something which has been drastically underestimated this year in the home buying market so we could be looking at a substantial hit to rentals too.

This is something I haven’t really seen a lot about, most people seem to suggest the opposite, that the rental market will offset the losses of buy to let investors in London, but I just cant see it happening. Landlords do not run a cartel, they compete against each other.

I have a strong feeling that due to seller’s reluctance to sell, we will be seeing a severe drop off in rental incomes for landlords over the next few years.

I know of one person who spends almost £6,000 a month renting in Sloan Square and he was contemplating moving outwards to save a bit of money. There’s not many of us who can afford £6,000 a month in rent, so my prediction would be that these inner city rentals will have to come down in response to a lessening in demand, and this should have a knock on effect permeating outwards.

I see rentals having a strong relationship to house prices. When house prices rose, land lords put up rents to cover mortgage repayments. Whilst house prices were climbing people were paying £800-£1200 to rent in 2 bed flats in standard areas around the capital in very basic living accommodation, just under what it would cost to pay a monthly mortgage. But if house prices fall we could see a number of properties sitting on the market for a while at unrealistic rental prices – Landlords unrealistically expecting they will get tenants to cover their mortgage payments.

I have already seen this in the SE area with some rentals not moving for months. It would only need a short term build up to occur and there could very quickly be an over supply in the rental market.

People are incredibly resourceful and at times like these we all look at our expenditure and cut back where necessary. In London, our biggest expenditure will definitely be rent. Most of my friends are couples in 2 bed flats, we have considered flat sharing to save costs. We have decided to move in with family for a few months. More and more people are turning to short term fixes to help them get through this period, I feel that this will reduce the demand for rentals around London and drive rental prices down.

So, how will rentals be affected by a reduction in house prices? I think there will be an initial spike in rents as people sell to rent but then a severe drop off as new inexperienced landlords chase the rental market. Those that can’t sell have already put their properties out to rent. In March, we offered 335k for a property bought for 290k in June 2007, they rejected our offer (thank god!). In the end, no one would pay what they would accept, and in the end they put it on to rent at £1450 a month. 2 months later it’s down to £1350 a month and still hasn’t shifted. Its an absolutely lovely flat, but people just don’t want to pay more money than they have to at the moment.

There are more people wishing to rent now, but everyone is being squeezed so much that people are looking for the cheapest deals. Its like Aldi & Lidl phenomenon in the rental market. Many other industries have also claimed to be recession proof and have been proved wrong, why should rentals be any different? Why do Buy to Let landlords think rental prices will grow if the economy doesn’t?

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I hear a lot about supply and demand in the rental market and how this will push up the price of renting. However, affordability is something which has been drastically underestimated this year in the home buying market so we could be looking at a substantial hit to rentals too.

This is something I haven’t really seen a lot about, most people seem to suggest the opposite, that the rental market will offset the losses of buy to let investors in London, but I just cant see it happening. Landlords do not run a cartel, they compete against each other.

I have a strong feeling that due to seller’s reluctance to sell, we will be seeing a severe drop off in rental incomes for landlords over the next few years.

I know of one person who spends almost £6,000 a month renting in Sloan Square and he was contemplating moving outwards to save a bit of money. There’s not many of us who can afford £6,000 a month in rent, so my prediction would be that these inner city rentals will have to come down in response to a lessening in demand, and this should have a knock on effect permeating outwards.

I see rentals having a strong relationship to house prices. When house prices rose, land lords put up rents to cover mortgage repayments. Whilst house prices were climbing people were paying £800-£1200 to rent in 2 bed flats in standard areas around the capital in very basic living accommodation, just under what it would cost to pay a monthly mortgage. But if house prices fall we could see a number of properties sitting on the market for a while at unrealistic rental prices – Landlords unrealistically expecting they will get tenants to cover their mortgage payments.

I have already seen this in the SE area with some rentals not moving for months. It would only need a short term build up to occur and there could very quickly be an over supply in the rental market.

People are incredibly resourceful and at times like these we all look at our expenditure and cut back where necessary. In London, our biggest expenditure will definitely be rent. Most of my friends are couples in 2 bed flats, we have considered flat sharing to save costs. We have decided to move in with family for a few months. More and more people are turning to short term fixes to help them get through this period, I feel that this will reduce the demand for rentals around London and drive rental prices down.

So, how will rentals be affected by a reduction in house prices? I think there will be an initial spike in rents as people sell to rent but then a severe drop off as new inexperienced landlords chase the rental market. Those that can’t sell have already put their properties out to rent. In March, we offered 335k for a property bought for 290k in June 2007, they rejected our offer (thank god!). In the end, no one would pay what they would accept, and in the end they put it on to rent at £1450 a month. 2 months later it’s down to £1350 a month and still hasn’t shifted. Its an absolutely lovely flat, but people just don’t want to pay more money than they have to at the moment.

There are more people wishing to rent now, but everyone is being squeezed so much that people are looking for the cheapest deals. Its like Aldi & Lidl phenomenon in the rental market. Many other industries have also claimed to be recession proof and have been proved wrong, why should rentals be any different? Why do Buy to Let landlords think rental prices will grow if the economy doesn’t?

Good points however I would argue that the rental market does not have a relationship with house prices and the increase blip we saw last autumn was in response to the usual seasonal demand and LL trying to cover increased mortgage costs as interest rates started to rise. The renatl market as you say is driven by affordability and wage levels and has since settled

The problem with the current total market is it moribound, it just can't move so the supply and demand drivers are only being changed in the shorter terms by those coming in the bottom of the ladder (students and kids living home) There has been some upward disruptive influence from the desparate sellers resorting in renting (to cover high mortgages) but that seems to be short lived.

Think of it this way, house prices only went up (despite what idiot pundits said) because of the supply of cheap money and consumer exuberance, the amount of money actually spend on mortgages per month did not differ as much as house prices went up thanks to low interest rates. Rents have a direct relationship to affordability, so do monthly mortage payments, house prices are driven by how much that amount of money can buy plus some for the additional human lemming behaviour of "it will be OK"

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I`ve been looking at 2-3 bedders in Sussex(Horsham)/ East Surrey for the past couple of months and have noticed a significant upswing in demand in the 800-1200 pcm price range. The properties that are sticking are either a) crappy new build hovels or B) those that are aspirationally priced. Anything that is sensibly priced is flying off the shelves to the point that EA's, browbeaten until recently due to the collapse in sales, have started giving me attitude! I have hardly managed to view anything as people are literally queing up to view and are putting in full price offers as soon as properties come on to the market.

I think prices are generally up 10-15% on last year. I have also noticed several properties which were intially up for sale now being let out but these are few and far between, atleast for the time being..

I feel that the meltdown in property sales has pushed a lot more people into the rental sector and has definitely driven up demand. I am sure that prices would tumble when the economy tanks and people start getting laid off etc, but it doesn`t help people like me who are looking to move soon :mellow:

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"When house prices rose, land lords put up rents to cover mortgage repayments"

Wrong Rents have been stagnent for the last 4 years it's only during the last year they have been climbing.

Rents are going up in some areas I live in London not to far from Greenwhich (Zone 2) the flat opposite me is now reting for £100 more than it was a year ago!

I'm lucky I own my place so don't need to worry about rent increases :)

But my mortage payments will go up at the end of my fixed term :(

I still have 4 years to go on my fix :)

I think rents are going up in some areas and falling in others.

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It's pretty complicated at the moment. Facts as we see them as London lettings agents:

- There are more mid market flats to rent in London than a year ago. Many are from the sales market where owners are unwilling to sell.

- There are more tenants looking at affordable flats to rent, and less affordable flats to let for them to view

- There are more sharers looking to rent with budgets of 150 - 300 per person/month. This is mopping up some of the surplus in mid market flats, but not all, consequently rental prices in some areas are down 10-15% on a year ago.

- Top end market (circa 1200+ pw) is still doing well with reasonable equillibrium of supply/demand

- Generally speaking rents are holding up well. There is still alot of chaffe out there - and well presented flats and houses to rent in London still find tenants at good rents - sometimes up on a year ago

The overriding variable is how well the city does over the next couple of years. It's pretty clear where the rest of the UK is heading. London property does still operate in its own "micro climate" where affordability is not the main mechanism at work in the market - as it seems to be in many parts of the UK as incomes are squeezed at the same time as "real RPI" heads towards 10% and more.

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How do you guys think the seasonal changes will effect things? Am I right in thinking theres generally more people in London over summer because of the tourist trade and therefore more jobs, more requirement for housing. Will there be a lot more homes empty over the winter, will poorly paid immigrant labour go back home as people seem to think? surely 35% gas hikes, negative press and general doom will cause people to act.

What of all those whose AST are running out and can now move back home, will they leave the country? Is London still as attractive to all those Australian and South Africans which come to London every year? I am born and bred here and am myself thinking of fleeing the ship.

My girlfriend works for a large organisation which has to shed tens of millions off its budget, one way to tackle this is to employ fewer staff - and they will do it. What will tend to happen is they will have natural wastage which they wont replace and also make redundencies of the worst staff or cheapest to let go of.

When the economy was thriving, London could house everyone it needed - ok so it was crampt, but it managed. Now that the economy is slowing down and say only 90% of the workforce is needed, will that not leave a rather large vaccum or more competition between landlords to keep their place tenanted?

I was reading a thread on another forum about how Detroit was a booming car manufactoring city, but nowadays hardly anyone has a job. I don't think it could be quite that dramatic in london, but I have lived here for 5 years and thought it was ever so expensive, now a days its going to feel even worst, can we actually afford to live like this?

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How do you guys think the seasonal changes will effect things? Am I right in thinking theres generally more people in London over summer because of the tourist trade and therefore more jobs, more requirement for housing. Will there be a lot more homes empty over the winter, will poorly paid immigrant labour go back home as people seem to think? surely 35% gas hikes, negative press and general doom will cause people to act.

What of all those whose AST are running out and can now move back home, will they leave the country? Is London still as attractive to all those Australian and South Africans which come to London every year? I am born and bred here and am myself thinking of fleeing the ship.

My girlfriend works for a large organisation which has to shed tens of millions off its budget, one way to tackle this is to employ fewer staff - and they will do it. What will tend to happen is they will have natural wastage which they wont replace and also make redundencies of the worst staff or cheapest to let go of.

When the economy was thriving, London could house everyone it needed - ok so it was crampt, but it managed. Now that the economy is slowing down and say only 90% of the workforce is needed, will that not leave a rather large vaccum or more competition between landlords to keep their place tenanted?

I was reading a thread on another forum about how Detroit was a booming car manufactoring city, but nowadays hardly anyone has a job. I don't think it could be quite that dramatic in london, but I have lived here for 5 years and thought it was ever so expensive, now a days its going to feel even worst, can we actually afford to live like this?

I think the Detroit analogy is a little off the mark, Detroit had three employers, Ford, GM and Chrysler both virtualy pulled out, London has 1000's of businesses although many are linked to finance, many are not such as legal and corparate HQ's for UK multinationals.

The Aussies that come don't really contribute to the ecomony and hence rental prices and London will always be an attractive place to do business thanks to our laws so I suspect an amount of status quo will exist.

The peak rental change period seems to be early summer and Autumn... Tourism/seasonal worker clearly do not affect the AST market as they only stay for 3-4 months

Edited by Matt Henson

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It's interesting what we are seeing in the south east.

Rentals are certainly dropping in some agents shop windows whilst others seem to be putting prices up ever higher.

Someone here (sorry but can't remember who) said about more rental properties because owners are unwilling to sell. Actually owners can't sell, especially if they can't afford to take a drop because of negative equity.

I was looking at a local property paper today. A two bed flat in a good area was letting for £800pcm. Another agent had another 2 bed flat in the same block and it was being marketed for £1100pcm

Another 2 & a half bed terrace is on the market for 1500 pcm, whilst a similar house 2 streets away is on the market for 975 pcm. Is this naivety, greed or just pure desperation?

Imagine what it must be like to own a house with a 100% mortgage who's fixed rate has just come to an end and who can't afford the repayments.

These are the new landlords coming onto the market and this is why we are seeing temporary and variable upward rentals. I really don't know what's

going to happen to those house owners (hopeful landlords) or maybe I do.

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London london london, overpriced, smelly, too much hair gel and no substance.

Get out of it, rents much cheaper 20 miles north & from what I'm seeing not rising at all in fact falling.

Whats wrong with commuting.

Just like the housing market an inflexion point will be reached in rentals and london, like dublin will get very bloody

Edited by Live_in_hope

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London london london, overpriced, smelly, too much hair gel and no substance.

Get out of it, rents much cheaper 20 miles north & from what I'm seeing not rising at all in fact falling.

Whats wrong with commuting.

Just like the housing market an inflexion point will be reached in rentals and london, like dublin will get very bloody

The problem with communting is the cost I work in the city and some of the guys I work with spend ALOT on trains >100 week.

Would you rather give that money to the train companies or spend it on rent?

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The problem with communting is the cost I work in the city and some of the guys I work with spend ALOT on trains >100 week.

Would you rather give that money to the train companies or spend it on rent?

Slimey estate agent or train company....

Wheres my train !

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  • 399 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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