Sunday, June 15, 2008

Just can’t bear to sell for less

Sellers beat the slump by renting homes

Seems a strange decision to let. Even if one is rich enough to be able to afford to buy two houses, the tax implications and the hassle of letting, not to mention the steady decline in equity, does not make letting look a particularly tempting option. Still, more choice for us renters.

Posted by letthemfall @ 10:24 AM (1577 views)
Please complete the required fields.



17 thoughts on “Just can’t bear to sell for less

  • This is just like it happened in 2002/03, when people unable to sell rented out even at lower rents as long as the tenant offered some sort of security, stable families in stable jobs, prepaid rent etc

    I am waiting for Stuarz Law to kizz my azzetz that rent can go up in this environment

    MAYUU AUUA UAAUA HAH HAHHAHAHAHAH AH

    Reply
    Please complete the required fields.



  • ‘It could be argued that encouraging people to be landlords in this type of climate, if they’re not professional and haven’t thought it through, is a disaster waiting to happen,’ he says. ‘We don’t want to encourage people to get into being a landlord to help them overcome problems with selling their current property. It’s not a very tenant-focused way of thinking.’

    Yeah, wishful thinking, you wanna stop the flood of new rental properties….. it “could be argued” that rents will just and simply CRRRAAAASSHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH
    due to supply and demand!!

    AHAH HAHAHHAHAH AHHAHH

    Reply
    Please complete the required fields.



  • Well i dont want to rain on this parade, but i am a little confused. If people start to rent out their properties rather than sell, then where and how will they move? If its an investment property that they are trying to sell then fair enough. But if they are truying to sell to move, and they cant sell so they rent out presumably this just means they rent somewhere else, so no net change in Supply and Demand.

    Am i missing something?

    Reply
    Please complete the required fields.



  • I know someone who is in exactly this situation. Unable to sell the house, but still needing to make mortgage payments, they’ve decided to rent it out instead “until the market picks up again”. The rent only barely covers the mortgage interest which is still at the low initial fixed-rate. When the SVR kicks in (not until 2009 or 2010) then they’ll be effectively subsidising their tenant, until they can’t afford it any more.

    Good news for us renters, of course. There’s a nice house for rent just down the road, the ad says “We’re moving to Australia and want to rent out our beautiful house”. Fools!

    Reply
    Please complete the required fields.



  • @techie,

    In the two cases that I know, one is moving back in with parents, the other to Australia.

    Also note the terrible yield: “The terrace home, originally marketed at £350,000 last year, is now rented out for £1,300 a month.”
    That’s 4.4%. Oooooh dear.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    Techie, I suppose what you are missing is that there is a modest oversupply of housing in the UK, i.e. anywhere between half a million and one million homes are vacant (or second homes – the statistics are all over the place).

    I suppose it’s possible that sellers decide to rent out their old home (effectively subsidising the tenant!) but in turn the seller would rather be a tenant (rather than a homeowner) wherever it is where they want to move to. The phrase ‘house of cards’ springs to mind.

    Reply
    Please complete the required fields.



  • It’s difficult to figure out which group of home-owners the writer of this article is referring to because as techieman points out where do this people live.
    However, I would hazard a guess that the following is an explanation and is actually the new business of model of one of my local EA’s. Faced with the fact that a property can’t sell the selling EA offers to rent it at no cost (fee) for a 12 month period, “until the market picks up”. The buyer can use the “additional income” to raise the mortgage on the new home. Oddly enough the criteria for this luxurious arrangement appears to be that the owner of the property that cannot sell is buying a property through the same EA. I know somebody who has subscribed to this arrangement. I asked him whether it surely must make financial sense to take a small hit now as opposed to wait 12 months a take a 20% hit. It was clear by the dim expression in his eyes that the concept of falling house prices clearly did not compute.

    Reply
    Please complete the required fields.



  • Cheekiecharlie says:

    What the writer of this artical fails to point out is that whilst these seller’s rent their homes out they are loosing value at the fastest rate in history and the market will only pick up again from a very low base. Lets see, my house is loosing 5K a month but I’ll rent it out for 1K a month. How smart!

    Reply
    Please complete the required fields.



  • scandinavian pessimist says:

    The irony is that the people most likely to go for the rent-instead-of-sell option are people trying to sell in areas where house prices are falling most (since in other regions they would be able to sell). They are therefore more likely than other landlords to have problems with negative equity in a couple of year’s time. Furthermore, the regions where prices are falling most are the regions where the economy is performing worst, which will put pressure on the rent and therefore force the landlord to subsidise most. All in all, it will only delay the inevitable and possibly make things worse since the amateur landlord does not have the knowledge required to run a business efficiently.

    Reply
    Please complete the required fields.



  • it_is_going_with_a_bang says:

    The tax implications if declared as it should be – would be enough to put most people off.
    Getting agreement from your lender if you have a mortgage would be another obsticle. Most lenders would not agree to this and could quite possibly increase your repayment rate.
    The number of people that could afford to or be in the situation to rent out cant really be that significant anyway.
    Whilst this may be a scenario for some owners on the overall picture it’s insignificant.

    Reply
    Please complete the required fields.



  • Our BTL landlady threw us out to sell just after the bubble burst, she is in for such as shock when the work on the house is done and the house is worth even less than when we turned down her silly offer to to buy as is (was).

    Our current house is a “for sale/to rent” job, it was on the market for £205k though apparently the last sale in the street was for £175k – probably why it didn’t sell, we are paying a rent of £750pcm, a yield of 5.1% pa – even less if you use the asking price rather than the current “real” value. The local market is awash with for sale/to let, the rising rents of earlier this year are now falling very visibly along with house prices..!

    Reply
    Please complete the required fields.



  • It’s not a very tenant-focused way of thinking – Landlord association

    Faced with increased supply of rented accommodation onto the market and undercutting established BTL the landlord association – which offers links to its members on how best to evict tenants – is now posing as the tenants friend. Is there no end to their cynicism ?

    Reply
    Please complete the required fields.



  • Another source of supply of property to let must be houses bought from 2005 onwards by builders and others who thought they would make a nice profit by upgrading and selling in a rapidly rising market. They upgraded (it probably took longer than planned because the builders they used were busy on ten different jobs and showed up when it was convenient for them) and then the market turned. Rather than sell for 20% less than they had hoped they rent the place until prices move upwards again (they probably read the ravings of Stuarz Law).

    Reply
    Please complete the required fields.



  • From my very unscientific research (looking at places to rent in my area on Rightmove), that certainly seems to be happening where I live. There are now about 7 pages of places to let < £500 per month, whereas previously there would only be about 1/2 a page.

    Reply
    Please complete the required fields.



  • most people who rent are single or couples and awill make do with a 1 or 2 bed flat if rents went too far…another restriction on higher rents.

    Reply
    Please complete the required fields.



  • So, on the demand side, we have a small increase of those FTB’s who were in a position to buy when credit was cheap, but now have to rent.
    On the supply side, we have BTLers in trouble, builders with unsaleable property, 2nd homers who now have a big increase in their debt servicing costs, so end up renting out those properties. And as inflation hits at spending power, people are going to use push for every ounce of value for their rent, mark my words.
    Ridiculous house price inflation and moderate rent inflation was good in the good times, now its a buyers market. There is only one way out for property holders : at a loss. Or hold on to their depreciating assets, as their cost of debt rises, and their capital evaporates. The smart money is already selling (at a loss.)

    Reply
    Please complete the required fields.



  • last_days_of_disco says:

    Its plain old denial. When your short term speculation goes wrong, fool yourself into the idea that you really are a “long term” investor. You see it everywhere.

    So now people are going to hold on to this thing while it poisons their finances for years and years to some? If its a small flat and you want to keep it and you can afford to make the payments because you were careful in the first place, then fine. Having a permanent domicilium executandi has advantages outside of pure financial benefit. But at what cost?

    Lots of folks have stupid mortgages, they are toast. This is going to be a very painful ride, it would be better if people were just evicted and it was all over, this slow painful decline is like a cancer killing the body. Instant financial death would be a kindness in this case. Better to go spectacularly bankrupt than trying to eke out an existence for 20 years.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>