Wednesday, October 24, 2007

Rising rents

Rental squeeze horror tales

It isn't always a good thing for the property market to stagnate even for renters. Sydney has had a big boom followed by stagnation and falling prices in some areas. This has lead to an undersupply or rented property! It took a couple of years but it happened. Australia has a very similar housing market to the UK

Posted by maddison @ 10:22 AM (1987 views)
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18 thoughts on “Rising rents

  • so… does it make you happy?
    undersupply of basic facilities like housing is always bad thing for the economy. do you agree?

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  • Absolutely undersupply is a bad thing. What really annoys me is how slow the property market takes to react. Of course building a house takes time but councils and developers taking years to agree planning permission is ridiculous. Have you ever wondered what the country must have looked like in the 1930’s as so many houses seem to have been built then. Now that is what I call a House building programme Gordy.

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  • This does raise an important point; the downturn in the housing market in the UK is encouraging landlords to sell up (can already be seen happening) . At the same time, potential buyers are likely to be put of and will turn to renting instead. This increase in demand and decrease in supply can only lead to rental prices going one way. This trend will happen until rental yields reach a level whereby buy-to-let investments become viable again. Ie when prices fall and rental yield increase to a point whereby buy-to-lets are profitable without capital gain. This is when landlords will start to buy property again and the cycle will repeat itself!!!!

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  • I’m anticipating a sharp rise in UK rents when BTLers try to get out, to be followed by a gentle fall after the sale prices have crashed. Single tenants will react by sharing properties more intensively, or returning to live with parents. Families who are renting will be much more likely to go into arrears.

    For renting to be attractive in a market where house prices only rise by the rate of wage inflation, rents need to rise (in my locality) by about 40%. As tenants tend to be below average wage earners, I think the majority would have a serious problem finding the extra money..

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  • tyrellcorporation says:

    UT, I think some of this rental rise will be tempered by a large migration of 20 somethings moving back in with their parents – I believe this has already started. It is a bit of a disaster for society IMHO.

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  • It’s ridiculous that renting houses has been such a money spinner in recent years, and things will return to normality once prices have stabilised (below their current level)
    Landlords have been able to keep rents relatively low becuase they have been making money on the capital gain. Now CG is over, the property has to wash its face in terms of rent income so the rent has to go up, and there is less incentive for a landlord to increase their property portfolio. Hence undersupply of rented property after the boom.

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  • From this post and past comments I’ve concluded Maddison is a property bull. Look on the bright side, median house prices in Sydney have FALLEN in the last year.

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  • This has happened in Norway too. House prices have stagnated and people are sitting on the fence wondering what is going to happen next and renting instead of buying. It is hard to get rented accommodation now in the capital for a fair price. Meanwhile, the property market is swamped with flats that are not selling. We were told that there were not enough properties being built here and too many people – but if that were the case, surely those with no place to live would be jumping in now. Same thing could happen in the UK…..

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  • The rental market is a little more fluid and logical. Just because landlords want to raise rents doesn’t mean they can. Voids are far more damaging then not raising rents. Rents will only rise if there is less supply of rental property or increased demand.

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  • The projected UK population in 2010 is 26 million according to Optimum Population Trust
    But also see: The UK’s population problem

    See also:
    Daily Telegraph: Record immigration sees UK population soar 24/10/07
    Daily Telegraph: UK ‘will swell to 75m’ as migrants raise births 22/10/07
    Daily Telegraph: Population in Numbers

    Basicaly it is not to our advantage to increase the land area developed for urban use. But if the population increases, then if the increased density will cause ever increasing friction between the members of our society, whether this is on the roads, outside the entertainment facilities, or just with next door neighbours. We should be looking at the population density of other countries joining the EU, and where they have lower densities, we should be actually migrating to them, and reverse the current trend of economic migration to the more developed economies.

    Wikipedia: Population density
    Wikipedia: World population density map
    Wikipedia: List of countries by population density

    This will have a many-fold benefit, of actually exporting successful business to the less developed countries, they will of course have to have an improvement in their government, and social facilities to encourage this, and I very much doubt that any African, Eastern European or any other state will like the “Colonial” impact of having to “improve” their society.

    Otherwise the more attactive destinations for economic migration will have to shut their doors.

    I never expect that this will be easy or popular, but ignoring the problem will only make the medine worse when a China style rule is imposed, that there is “Only one baby per family” or 0.5 babies allowed per adult, then you can trade your baby voucher if you do not want children !!!

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  • i am suprised this is an issue in sydney.
    rents have not risen like this in the US, where the hpc is more underway.

    if many of the BTL speculators sell up there will be less rentals available, but presumably the buyers of the houses sold by BTLers will be current renters. my guess is nominal rental amounts will not be significantly affected in the same way they have not been by the boom in house prices.

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  • The difference surely is that, while landlords might like to keep increasing their rent year on year, if people cannot afford it, then they wont pay up! Simple as that – they will only push so far – you wont see rents rising like house prices, and there will come a point again where buying is cheaper than renting.

    I still like the idea of introducing a “right to buy” into the private renting market.

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  • tyrellcorporation says:

    Population of New Zealand (Similar land mass as UK) = 4,115,771

    ‘Ahhhh, a fish can breathe out here’ (Finding Nemo)

    I’m still waiting for a crash in the NZD, then I’m off…

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  • tyrellcorporation. Interesting me and my wife are currently exploring the possibility of going to NZ. As you say this country is doomed and I do not think it is going to be a nice place when my daughter grows up. If the population swells as they said yesterday can you imagine what it will be like. I travel in my job and navigating the A14, M25, M11, M6 etc is a miserable existance.

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  • Why assume that tenants are below average earners? Plenty of people (particularly on this forum) are renting out of choice because there isn’t fair value in the market for buyers at the moment.

    Also rents are pretty cheap in most parts of the country right now. Where I live (Edinburgh) rents have hardly gone up at all in the last ten years so even a 20% rise in rents would be easily absorbed by most tenants. I just don’t buy the rising rents argument.

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  • Likewise….I think a lot of people are though. I was out there last Christmas and a lot of the country has been snapped up. Wealthy soon to be retired people building their houses on the coastline.

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  • tyrellcorporation says:

    Without wishing to put down my own country, I can’t help feeling that the UK is living on borrowed time (as well as everything else!) and is no place to bring up a family anymore (house prices, poor education, crime, over-crowding, etc, etc). If the opportunity comes to me over the next 12 months I’ll go and try out NZ. Luckily my wife was born there and so it should be fairly straightforward to get in. I’d very much miss certain aspects of UK life but the downsides of living here have become too great (for me anyway).

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  • Interestingly Tyrell, my wife and I are also exploring the possibility of moving to NZ, it is just an awfully long way from Friends and Family and is it safe from the ensuing credit crunch that is coming the way of the Western economies?

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