Tuesday, June 12, 2007

Pigs flying anyone?

Buy to let landlords report demand for rented properties outstrips supply - ARLA

Demand for rented properties seriously outstripped supply and rent levels rose during the three months to the end of May according to the latest quarterly survey of ARLA Member Letting Agents published today, June 11. These results show the shortage of properties and the continuing need for investment in the private rented sector at all levels...

Posted by converted lurker @ 01:05 PM (559 views)
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7 thoughts on “Pigs flying anyone?

  • Hahahahaha

    Hahahahaha

    The multitude of for sale signs and let signs on my road are down to my imagination then.

    I cant understand why they think this because , of course, to put out something that reeks of vested interest is far , far , far beneath them obviously.

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  • I do not buy it… I think the explanation i Money Week is far more convincing

    UK housing market: strong signals from buy-to-letters
    The UK housing market is creaking and there are some important signals. A sharp slow-down has been reported in buy-to-let purchases coupled with a big increase in buy-to-let property offered for sale, this is hardly surprising bearing in mind that rental yields are pathetically low; after taking account of voids and other ownership expenses, rents are insufficient to cover interest rate charges. According to the Royal Institute of Chartered Surveyors (RICS), the proportion of buy-to-let investors selling their property at the end of their tenant lease has jumped to 5.2% in the first quarter of the year, from 4.1% for the last quarter of 2006. Tim Hyatt, Head of UK Letting at Knight Frank, the Estate Agency, told the Financial Times that 10-15% of their lettings are being put up for sale in the last six months or so, whereas normally this figure is very minimal.
    David Stubbs, RICS Economist says buy-to-let rents are rising just as they did in the late 1980s, prior to the property collapse then. Buy-to-let properties are being sold and not surprisingly this is reducing the supply of rented accommodation, demand for rented property is rising as it becomes more obvious that the property market is in difficulty.
    If the Daily Telegraph is right in recently reporting that the UK housing market is over-valued by up to 20%, then the scale of down-side is very considerable because bubble-type prices always go too high, e.g. 20% over-valued, to then fall back too far. Based upon past experience, from current prices, a 40% downside is therefore feasible. Estate agents across the UK are seeing a substantial rise in the number of properties coming up for sale.

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  • Let’s break this spin down…

    “Demand for rented properties outstrips supply – ARLA” – nice headline, but ARLA forgot to add the sentence ” – in prime central London and parts of the South East”. Makes quite a difference that does – we all know London is a law unto itself at the moment, and only about 10% of the population live there so what relevance is that tothe rest of us?

    “Rents rose for the fourth quarter running for each type of property” – I would normally expect rents to rise as wages rise, this is the norm, so it’s hardly news is it? It’s how much they’re going up that would really tell you something, but no figures are supplied for that, strangely enough.

    “[I]n the rest of the country the proportion of agents reporting rises rose from 33% to 35%.” So that’s still 65% of agents reporting either no rises or perhaps even falls then – sounds a lot to me. What proportion are reporting falls? Again, no figures supplied – methinks a pattern is emerging.

    “Seven out of ten Prime Central London agents say there are more tenants than properties. This is the highest figure seen since the ARLA surveys started six years ago. In the South East, ten percent more agents report demand is outstripping supply and the proportion in the rest of the country with a lack of supply has also risen.” 70% is admittedly a high figure, very headline grabbing. The fact that the equivalent figure for the South East and “the rest of the country” suggests to my suspicious mind that the figure isn;t quite so headline grabbing in these other areas. South East – ten percent more – ten percent more than what, exactly? If the previous figure was 10% and now it’s 11%, that would be 10% more – not very impressive. The increase is so tiny in “the rest of the country” that they don’t even bother saying what it is!

    Anyway, why has “a lack of supply has also risen”? Could it be that (a) fewer new BTLs are being purchased and (b) more existing BTLs are being sold? Which hardly suggests BTL is healthy – again, the abscence of comment on the reasons for less supply speaks volumes – you can bet they’d be shouting about it if demand was rocketing up, but they don’t.

    “The average capital asset values of rented houses rose during the past three months by 2.2% in Prime Central London, 0.3% in the Southeast and, by contrast, fell by 3.9% in the rest of the UK.” So why didn’t the headline say “value of BTL properties falls in most of the country!” then? This is a very heartening little nugget that they let slip out – in “the rest of the country” rents aren’t really rising but property values are dropping! Cool – I live in “the rest of the country”, let’s see how many BTL’s cash in to lock in their capital gains of the last few years by selling, in order to put their money in something that is actually going up (a proper investor would be constantly moving capital to rising markets out of falling ones – but then a lot of these guys are clueless ametuers I suppose so we’ll just have to wait and see).

    “Despite the rising rent levels, the average weighted returns are down marginally from 5% to 4.8% for houses and from 5.1% to 5% for flats. .ARLA believes this to be a reflection of continually rising house prices during the quarter.” So, in most of the country, the value of rented property is falling (as stated in previous section) yet property in general is rising in price – so renting a property out reduces its value? What a good investment then! Or does this discrepancy just show that overall average prices are being heavily weighted by more expensive properties, masking the fact that cheaper properties (including most BTL therefore) are actually suffering already? Returns are down, despite rent levels rising – priceless!

    Even when trying to put a positive spin on things, they’ve been unable to for anything outside of London (as long as people are smart enough to actually think about what is really being said, or not said, of course). The future for death of BTL is looking bright when even the VIs can’t big it up anymore.

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  • And expect London to catch a chill too when interest rates pierce 6%

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  • To quote their report – rents are actually falling it seems to:-

    Compared with three months ago, average rents for houses are down by
    2% as a result of falls of 6% for the Rest of the UK and 4% for the Rest of
    the South East. Conversely, on average, respondents managing
    properties in Prime Central London reported an increase of 2% in average
    house rents for their area.
    Average rents for flats are also down overall, by 4%, with falls recorded in
    all the three main geographic areas. For respondents managing
    Page 20
    properties in Prime Central London average rents for flats fell by 3%
    compared with falls of 4% for respondents in the Rest of the South East
    and 6% for respondents in the Rest of the UK.

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  • I do buy it! Immigration from Eastern European migrants is increasing exponentially…

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  • Dugmug is no mug!

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