Monday, May 19, 2008

Monday evening at The Comedy Club – Paragon’s latest buy-to-let (BTL) index.

Rental incomes rise 14 per cent

Rents continued to rise in April as tenant demand for private rented properties grew. Rents have risen nearly 14 per cent over the last year to stand at an average annual income of £12,048 in April, having broken the £1,000 a month barrier in March.Paragon also revealed that the buoyancy in the private rented sector has been spurred on by the fact people in their thirties and forties still cannot afford to get on the property ladder and are having to rent instead.

Posted by jack c @ 04:55 PM (1197 views)
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25 thoughts on “Monday evening at The Comedy Club – Paragon’s latest buy-to-let (BTL) index.

  • The Haunted says:

    Where do they get these statistics? My rent has not changed and I don’t see any difference in my area (Fleet, Hants). If anything, once the prices of houses come down there will be a lot less people looking to rent. in the mean time I’ll keep renting and creating a deposit out of the money I am saving.

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  • Why does the media take these figures at face value when Paragon have such a vested interest in showing higher rents?

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  • £1000 a month.. easy.. after all we all do earn lots.. ya like erm 4000 a month ish.. right..

    £1000 completely affordible.. no problems there at all.. unless your a nurse, teacher, etc….

    So yes I bet the average rent will hit £2000 by this time next year..

    THEY LIE LIE LIE

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  • Quick poll, are rents in your area going up or down?

    Definitely up here 🙁

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  • yorkshireman says:

    People in their thirties and forties cannot afford to get on the property ladder, so they have to pay our inflated prices. Not for much longer Paragon(e). When the history of UK house prices is written, it will be clear that you and others of your greedy ilk, were amongst the chief architects of the crash.

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  • Once again, Paragon gloriously misses the point that if people can’t afford to buy, why should they be ale to afford to rent?

    What is so magical about renting?

    OK, if you have to move frequently, then stamp duty and estate agent fees mitigate against you. If you have a bad credit history, then getting a mortgage becomes problematic.

    But home owners take more care of their homes, and are better at judging when to repair or redecorate. They usually pay less for maintenance than a landlord does.

    The occupancy rate is also much higher, and there are no management or letting agent fees to deal with.

    In a sustainable, stable property market, the sustainable level of rents is around 7% of capital value p.a. – more than that and big money gets interested, less than that and people look for alternative investments.

    By and large, private tenants (who are not on HB) can’t afford a 7% rent, and at present, most rents seem to fall within 4.5% and 5.5%.

    In the wake of the crash in capital values will come a second, less visible, collapse in rents; which will provide the final coup-de-grace to the concept of BTL

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  • Stupid_boy_pike says:

    If money is tight for mortgages, it’ll get tight for rents as well. If there’s no money around, everything will be effected.
    Presumably, a reduction in house prices will result in a reduction in rents.
    I rent and am looking regularly because we have to move soon. I cannot say I have seen an increase in rent in Cornwall and there is a lot of stock advertised on Rightmove, a lot of which has been there for weeks and months.

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  • new user 2007 says:

    How come ParaGONE does not mention that BTL interest payments have risen by 25% (from around 4.5% in 2005-06 to 6%+ now) over the same period i.e. rents have not caught up with rates.

    OR that the capital appreciation they relied on since 2005 is gone, so whatever meagre rises have actually taken place are going to be more than offset by price falls:)

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  • You can pretty much proove what you like with statistics, so I would be inclined to take these statistics with a pinch of salt, especially comming from a VI like Paragon. I have only anecdotal data from my area, but nice rental houses in rightmove are taking a lot longer to let these days.

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  • little professor says:

    Up here aswell, but still average rents are half the value Paragon are spouting.

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  • Stupid_boy_pike says:

    Something else I have noticed with Rightmove. The number of properties in the higher priced bands in Cornwall, say £1000 plus pcm, has significantly increased

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  • it_is_going_with_a_bang says:

    Rents static here.
    As said before, if people cannot afford to buy then they are hardly likely to be able to afford rent increases either.
    You may well see asking prices for rental increasing, agents try to claw back lost revenue from sales, but to say that rents can continue going up is just stupid.
    Mine got renewed with no increase at all 2 months ago for 12 months.

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  • crash bandicoot says:

    “Rental incomes rise 14 per cent ”

    But no mention of whether they cover BTL mortgage repayments…….

    Aw go on then sign me up for two years interest only, I’m feeling lucky today and I can’t be bothered to buy a lottery ticket.

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  • started renting in July 06, 3 bed semi, horsham west sussex @ 850/mth, July 07 @ 875/mth and from July 08 @ 895/mth. that’s 5% over 3years. purchase price of equivalent house is 299k, even with 50% deposit and 150k mortgage at 6%, repayment is 750/mth. not many people with 150k deposit so it’s a no brainer. hopefully market will bomb before my next renewal in 2009! Happy days!

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  • Part of my comment from earlier article posted by letthemfall @ 01:53 pm.

    “I also expect to see an attempt to ‘Ramp’ Rents for the same reason.”

    I am sure there will be a concerted effort to acheive an atmosphere of High Rents. Time is running out and the motives are obvious.

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  • scandinavian pessimist says:

    Guys,
    You forget about one importat point here: most FTBs are not priced out of the market because they cant afford the interest payments but because they cant afford the deposit. How many 25-30 year olds have a spare £40k? They may not find renting cheaper but they can no doubt absorb significant rent increases.

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  • Rents are down here is Dorset on the new Duchy estate in Poundbury.

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  • In Aberdeen there is so much property that is not selling and going on to the rental market that it’s keeping the prices very reasonable. Assume the same will happen elsewhere (it looks like Scotland is quietly leading the house price crash but no one here knows about it yet!!)

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  • Fair point scandinavian pessimist. But I do think that within a few months there will be adequate evidence of job cuts (above and beyond the EAs – the builders are already ceasing work) and subsequently a flood of departing immigrants (emmigrants? Returning Immigrants? Departing immigrants? Whatever), and also more redundancies and therefore a lot more defaults (on mortgages or rents – same result anyhow), and this will have a massive.

    I also think that FTBs will start sharing or move back in with their parents in a last ditch effort to save a deposit – but I can’t see this having a massive impact.

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  • Rents in Basingstoke were rising in the first quarter of this year, I’ve been forced to look as my BTL owner has decided to sell, however as we held out to the very last minute to actually sign for a new property we have noticed that they have started to drop sharply as the market has been flooded with houses that can’t sell. In the end we sent from £725+£30 per month for our tiny cottage and garage to £750 for a modern but equally tiny house+ garage.

    I’d say that rents are not rising because people are skint and the market is awash with vacant property.

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  • One thing that is becoming evident (IMO) is that a return to weekly or monthly budgeting is effectively being forced upon people as cheap and easy credit becomes less readily available – consequently people looking to rent are going to have to add up the cost of the rent, council tax, water rates, gas/elec etc… before commiting themselves and if the budget doesnt stack up they’ll make alternative arrangements as per inbreda’s posting above. So unlike the merry men from Paragon and the BTL brigade I actually think that as the economy nosedives and property prices fall rents will also come under downward pressure. Time will of course tell as this all plays out.

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  • crash bandicoot says:

    scandinavian pessimist, I meant the interest payment that the landlord pays to the bank. If the money that you pay in rent doesn’t cover the mortgage interest to the bank, then the “investment”does not make a lot of sense (in the absence of capital gains).

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  • new user 2007 says:

    scandinavian:

    I know dozens of professionals who for one reason or another rent in London (the invincible area). Given housing is such a hot topic we have all concluded that not one of us is paying as much in rent as we woul dbe if we paid an interest only mortgage on the same property (assuming we bought anytime since 2006).

    Our rents have also not risen anywhere near what is suggested. The logic is quite simple…there is so much BTL 500,000 of the 1mn BTL mortgages were taken out since 2005, and there are around 2mn BTL properties (assume half since 2005) i.e. almost 10% of the housing stock…rents are not rising because there are so many BTL houses…

    Even if all FTBs were priced out by BTL, that would still only be a one for one swap i.e. there would still be no shortage to justify price rises. VIs are talking up the market rents because the actual return BTL sought (capital) is gone. So both anecdotally and in terms of common sense, I think ParaGONE is all talk…

    And if it was telling the truth, why is funding drying up most for BTL mortgage companies? Yes, their (unsustainable) model relied on short term funds and these have dried up BUT their shares are taking a beating because no one trusts their balance sheets i.e. markets consider BTL as subprime…why? because they are under financial stress.

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  • It’s obvious that the average rent has and is going to go up substantially

    All that’s happening is that more established families and OO’s are selling properties and either having to or are choosing to rent rather than buy another. Additionally there are more empty originally OO type 4+ bed properties around that are being put up for rent as sales have fallen through and bridging loans need to be met.

    All that’s happening here is an increas in the number of larger properties entering the rental sector.

    Nothing more.

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  • Here in SW Surrey (land of the 4×4 and Money is God) the last time I asked an agent I was told rents are rising with inflation but no more than that. Comparing rents to prices, the yield is about 4 – 4.5%. Certainly not a rental boom here. More for sale signs about too.

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