Tuesday, December 18, 2007

What a shocker!

Rental demand through the floor

"Demand for flats to rent has fallen sharply over the past three months owing to an over-supply of properties on the market..." Oversupply of properties? but... but... immigration.... the 2012 olympics.....

Posted by inbreda @ 09:36 AM (1720 views)
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22 thoughts on “What a shocker!

  • This is because there are not any new BTLers coming into the market. This will of course mean that rents rise for the existing tenants and rental returns will rise for BTLers who can “tough it out” as capital values fall back. The amateurs will go as soon as capital values fall but the pros will stay in as for them cash is king..

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  • japanese uncle says:

    Check the ownership of those major media, then you would no longer be surprised by those utterly contradicting lines just months apart. Buying newspaper is sheer waste of money these days unless you are interested in garbage.

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  • Demand does not drop due to over-supply of flats. Demand should be independent of the supply. Basic economics!!!!

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  • This doesn’t really make sense to me – they are talking about falling demand from tenants not buyers-to-let.

    Maybe some of the flats that were bought as investments and left empty have been put on the rental market causing oversupply?

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  • Maddison
    you must live in cuckoo land

    1. Truly professional btl’s have sold at the top of the market

    2. “This will of course mean that rents rise for the existing tenants” but who told you that?! You believe Savills and Troxtons? But what supply and demand equilibrium are you musing about? When a new BTL [email protected] enters the market he/she is not bringing fresh supply (unless the flat is a new build). So the lack of new locusts means nothing for prices, really.

    3. City jobs axed as we speak, bonuses are down, corporate expats are being repatriated, and the Central London rental market is gonna be in poo poo territory next year

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  • LONDON RENTS ARE DOWN DOWN DOWN DOWN
    FLATS FOR RENT STOCK IS UP UP UP UP
    IT IS OFFICIAL

    http://media.primelocation.com/content/priceindex/priceindex_200710.pdf
    see page 4

    http://media.primelocation.com/content/priceindex/priceindex_200711.pdf
    see page 4. MYYY GOD! they had to change the vertical azis scale to fit the letting stock of November. My advice is to switch to log scale next month

    MWAUU AUUUU AHAH AHHAHH HAHAHHAHAH AH
    Go down with the ship!
    AHH HAHAHHHAHHA HAHAHHAHAH

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  • You do not understand the fundamentals of rental supply. If BTLers sell flats to owner occupiers the rental supply will go down! If tenant demand stays the same then prices will go up period! Yes Central London may take a hit due to the credit crunch but that is not the whole country!

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  • planning4acrash says:

    I was laughed out of Keatons a few weeks back for suggesting that £250/week is too much for a 1-bed flat in Clapton, Hackney. Looks like I may have the last laugh!!

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  • So where are these potential owner occupiers that BTLers are going to sell to – oh that’s right they’re still at home / in lodgings / flat sharing / renting while waiting for the market to bottom out.

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  • You cant have it both ways. If you want a fall in prices by seeing BTL burnt then more investors are going to have to sell and unless they are selling to other investors they will sell to happy new home owners who can now afford a house. This will mean that less houses/flats are available to rent. People move up and down the rental ladder as well as the ownership ladder and this can create demand.

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  • The thing to remember is that people renting can afford to change their living arrangements at little cost and little notice. If I wanted to I could leave my rented two bet BTL flat and lodge with a friend, or rent a lodger the spare room. Each one of these options will drop overall BTL demand.

    Recent BTLers should have listened to Elvis when he sang ‘wise men say only fools rush in’.

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  • I think that BTLers will have a hard time selling their assets unless at a very knock down price. If they can’t then they’ll be forced to either give it back to the Bank or rent it out at a stinging loss. All that ‘money’ magiced into the economy by housing equity will have to be paid back in!
    I would also hate to be a surveyor/valuer at present, I think they will be forced to down value almost every sale within a few months or risk getting sued by the purchaser at a later date.

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  • Maddison,

    unless the happy new homeowners (if there is such a thing these days) weren’t renting before then they are simply exchanging one for the other, therefore their previous demand from the rental sector has now disappeared counteracting the loss of the previously rented property. Therefore no overall average change in demand.

    Personally I would expect in current conditions that people will generally be looking to save money, which probably means a net reduction of demand for rented properties e.g. for reasons that wage slave has just highlighted.

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  • Let the market decide. Sydney has seen a 10% fall in median house values since 2003. This stopped speculative development and now rents are rising. In fact some predict by as much as 40% next year. It has become a political issue. Having said that more investors are moving back in the market that should temper the rise a bit

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  • Maddison – to let the market decide you have to wait and see what happens, not predict what is going to happen next year!

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  • crash bandicoot says:

    Madison,

    If the BTL flat is sold to someone who is already renting then they cancel each other out. One less flat available, one less potential tennant. The only change is that the percentage value for the oversupply increases because that remains constant while the number of rented properties has dropped by one.

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  • @maddison, I think you’ve mis-read the article. The point is that there are fewer tenants. If there are fewer tenants then rents should fall (assuming the number of properties to let remains constant).

    In the long term you are right, the ratio of house prices to rent will return to normal. Under normal conditions, as landlords sell up the number of properties available to rent should fall, therefore pushing up rents and pushing down prices. With a falling housing market and a looming recession, both FTBs and BTLs will be unwilling to commit to buying a house. By choosing to rent instead they are likely to push up rents even as prices fall. Ultimately the ratio of house prices to rent will return to normal.

    However there are a number of special factors this time which weren’t present in 1992. The credit crunch means that house prices could fall faster than in previous crashes. The massive eastern European immigration of the last three years (Poland & others only joined the EU in 2004) means there is a huge transient population who could return home if the UK economy turns sour. Add to them the well-paid foreign workers in the City (western Europeans, Americans, Australians, South Africans, etc.) who also tend to rent and will be on the first flight home if they lose their jobs. I personally know a number of Australian workers in accountancy, IT, investment banking, etc. who wouldn’t hesitate to return to Sydney if they lost their jobs. Add to them the non-domiciled rich foreigners who are scared off by Gordon’s new tax raid on them.

    Labour mobility on this scale wasn’t seen in the 1992 housing crash. It could mean both rents and prices fall at the same time. That’s what tends to happen in America when a city loses its major employer, everybody just packs their bags and leaves for the next boom town – causing local rents and prices to fall simultaneously. When the US car industry started to shed workers in the 1980s and 1990s in places like Flint, Michigan, both house prices and rents fell as incomes fell. If the City’s financial sector sheds jobs and incomes fall, London and the UK in general could see both falling house prices and falling rents. In that scenario house prices would fall faster than rents, so that ultimately the price/rent ratio returns to normal. This is an unlikely, worst-case scenario, but it is possible!

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  • Another thing Maddison – rental prices are dependent on wages not just supply and demand. Even in Sydney 40% increases are impossible without high wage inflation.

    You’re right Drewster. Add to your points that if the downward trend in the value of the pound relative to the Euro continues this will encourage even more migrants to return home. Who in their right mind would want to come to the grim, overcrowded and overpriced UK if they can earn Euros at around the same exchange rate?

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  • @crash b,
    In theory one tenant cancels out one buyer. However a lot of FTBs go from multiple-occupancy housing (flat-share or house-share) to single-occupancy housing (first time buyer), which means it takes 3-4 tenants to cancel out one buyer. The vast majority of renters I know are house-sharing.

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  • The other thing everyone is forgetting is the huge increase in new-build flats flooding on to the market that weren’t there before. These increase the supply of property, seemingly a lot quicker than demand is increasing.

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  • New Build flats in our provincial towns and cities are the slums of the future, especially the ones aimed at todays FTBs.

    Buyer beware of being stuck with a pig.

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  • it_is_going_with_a_bang says:

    Rents won’t just keep going up, they are dictated by the ability to pay even more so than buying a house.
    Realistically in the short term there is plenty of rental stock out there.
    There are still plenty of flats etc still under construction everywhere which were started long before this all kicked off.

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