Tuesday, July 20, 2010

I find this most surprising. Anyone care to speculate on possible reasons?

Buy-to-let: demand for rented accommodation at record levels

Demand for rented accommodation reached record levels during the second quarter of the year, research has revealed. Countrywide, the UK's largest letting agent, said 50,480 people wanting to rent a property registered with it during the three months to the end of June, the highest level it has recorded since it started collecting the data in 2003. June saw the biggest spike in demand with more than 18,000 new tenants registering for rented accommodation, the highest number ever recorded during a single month and 22pc more than in May. [Even during the World Cup!] But the increase in the number of people looking to rent a home contrasted with a 6pc fall in the number of properties being made available to let during the period.

Posted by drewster @ 09:51 AM (2236 views)
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22 thoughts on “I find this most surprising. Anyone care to speculate on possible reasons?

  • yeh record number of properties on market , probably rental properties for sale..

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  • I’m not surprised at falling supply since landlords are selling. I am however surprised at the increased demand for rental property. Where is this demand coming from?

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  • Drewster,

    You heard it here first – I flagged up the shortage of rental property and rocketing rents last week.

    It’s true, and good news.. honest!

    Renting was only a cheaper option to buying, because landlords were willing to accept uneconomic rents against the expectation of capital growth.

    Many people on lower incomes cannnot afford an economic rent, so will increasingly share properties, or remain with their families. This will reduce demand, undermine the market, and lay bare the unsustainability of current property prices.

    And as prices slide, don’t expect a rush of new BTL buyers, just because the rents have soared – the BTLers will want the market to stabilise first.

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  • Cash rich buyers with no place to park their funds, interest rates at record lows and the forecast for BOE rate increases remain the same – equities very uncertain and only the brave dare venture into commodities, makes sense, unfortunately.

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  • “Where is this demand coming from?”

    Young graduates, loaded with debt, no savings, no BOMAD option, average income..

    ..people who WILL buy, but not yet..

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  • righttoleech says:

    Questionable grammar in this article. Three final paragraphs each have an opening quotation mark…..but only the final one has a closing quotation mark. The three paragraphs are not attributed to anyone….and exhibit strong ramping credentials.I smell BTL VI’s seeking more taxpayer subsity.

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  • mark wadsworth says:

    Everybody has to live somewhere, and either you’re buying or you’re renting (or living with parents). We know that prospective buyers are at record low (posts in past couple of days), so conversely, we’d expect the number of prospective tenants to go up to match. Maybe somebody can add the two figures together?

    The only way forward for the Home-Owner-Ists is to leave properties standing vacant rather than sell, to drive up rents and prevent prices crashing – the minute you do something sensible or useful with the house, you negatively impact the whole pyramid scheme. Many can afford to do this as interest rates are low and taxes on vacant property more or less non-existent etc etc.

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  • I was actually thinking of buying a plot of land , placing some nice sturdy tents on it and renting them out for about £100 or £150 a month..

    wonder what planning would make of it?

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  • montesquieu says:

    @righttoleach

    Not questionable grammar at all – the final three paras are the guy from Countrywide. When I was a newspaper sub-editor this is exactly how I was taught to punctuate: you don’t close the quote until the quote is finished (unless you want to put in a ‘he said’ or somesuch in the middle). Don’t you read newspapers? This is 100% standard, buy one and have a look.

    As to the article, no surprises, I bet a decent chunk of those people selling up this year are not buying immediately; add to that the students, job movers etc who would like to buy but don’t have 20% deposit/don’t want to pay silly asking prices and you have a rise in rental demand.

    Only an idiot would go picking up BTL properties now though as prices start their long slide downwards … oh wait a minute, most of them are idiots (those who bought post 2003/4 anyway …).

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  • Mark W,

    Fair points, yes. Your suggestion of a way forward for the HOIs is a prisoners’ dilemma. As soon as one party breaks the agreement, it all collapses. (Also interest rates are only low for some people, no? What about those people with 95% LTV, coming to the end of their 3-year or 5-year terms?)

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  • mark wadsworth says:

    @ Drewster, indeed, but the old established landlords with small or no borrowings can sacrifice the newer BTLers like the Wilsons or Greenbay, they are under no immediate pressure to do anything.

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  • You have to remember that those who would like house prices to remain high are in no way organised. No-one leaves a house empty as part of a grand conspiracy – everyone does their own thing.

    Prices took a sudden dip after the banking crash, and many took the view that normality would return in due course. This led to many people buying a new house before they sold their old one, arresting the price fall as supply dried up.

    Many of the properties that were left empty as a result are now on the market, which is now flooding.

    During the boom, the BTLers caused a shortage in the buying sector and a glut in the rental sector. It’s not clear how many BTL investors have been or are selling up, but what is clear is that the supply of rental properties is now very tight.

    The stage is now set for a market collapse, simply because the denial element has all but gone. People are more willing to accept now that prices will fall than they are to believe that prices will march ahead again.

    This is where small monthly price falls begin to gather pace. Where speculators start to offload, where potential FTB’s sit on their hands and whistle, when banks start to fear defaults..

    (RC: lets accepted..)

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  • righttoleech says:

    I appreciate the tutorial montesquieu…..Your grammar is better than mine, though I am far from illiterate.

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  • mark wadsworth says:

    UT: “those who would like house prices to remain high are in no way organised”

    This is very true – which is why the government does the organising on their behalf – low interest rates, bail out banks, force banks to lend, freeze council tax (and a zillion other tax exemptions for owner-occupiers), halve the number of newbuilds, sell of council housing at undervalue, overpay Housing benefit etc etc etc. These are all things which the government does.

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  • MW

    it is all about control of the people, houseprices, benefits, street cams, stupid laws, freedom of movement of lack of it, etc.. If you are a criminal it does not affect you, but an honest person well you are totally controlled by the government.. it is all about control..

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  • Uncle Tom

    I’m sorry but I don’t follow yourlogic of

    1/ Shortage of rental propertiess, hence prices rising (I get this bit)
    but 2/ BTLers selling up.

    Why would they if they’re finally getting more rent against reduced interest payments ??

    The increase in demand is coming from more graduates etc. + immigration against those dying (remember it takes 2 to die to release a house ).

    New build etc is at an all time low (just when the economy could do with an injection of labour and materials).

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  • BTL selling up because they

    1) fear further price falls

    2) higher taxes

    3) austerity measures will effect rents

    4) cut in benefits for housing

    5) pensions shortfalls

    there are many reasons, but the cut in benefits coupled with price falls will be a big driver

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  • “which is why the government does the organising on their behalf ”

    The last govt. but not this one – Grant Shapps is working hard to take away all the sweeteners..

    This, today: http://www.bbc.co.uk/news/business-10686369

    (for some reason it came up as a duplicate article when I tried to post it)

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  • many BTLers perhaps think the property is more saleable if sold with vacant possession. So they have turfed the tenants out to put an empty house on the market. It is good because it shows that BTLers are selling up, and as the amount potential purchasers can pay is limited, the prices will need to fall – leaving latecomers high and dry. Could take a while though

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  • str 2007,

    BTLers only really worry about capital growth – the rent goes some way to covering the interest payments, and if they show a profit, then that’s great; but it’s not the main attraction..

    ..if a rental shows a profit of £1k on rent then that’s nice, but it’s peanuts compared to a 10% gain (or loss) of the property’s value.

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  • Lots of housing market stats have been pretty tough to get your head around over the last couple of years, but I reckon the explanation for this one is summed up by Mark W @ 8. Next will come the “Now is a great time to invest in a BTL portfolio” headlines no doubt.

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  • Well, prices may fal, but I really doubt it will be BTLers selling up with interest rates low and rents on the rise.

    Looked at a BTL mortgage yesterday (so I could get a better view as to what’s going on.

    You need at least 25% down now, but with 4.5% interest rate the repayment is more than covered.

    In fact the example I was using was as follows :-

    3 bed town house rent approx £1150 p/m

    Cost £270k
    Deposit £70k
    £200k at 4.5% = £9k p/a

    11 months x £1150 = £12650 p/a – 15% management = £10752.50

    There’s a £1-2k arrangement fee and of course you have maintenance to deal with.

    This isn’t in my opinion a good investment to take on now. However for those already in place I just don’t see investors rushing to sell. Also bear in mind alot will be on resets and paying less interest than my example of what is available to a new investor.

    I heard of a property developer this morning running a £1m mortgage which used to cost £60k p/a and is now costing £10k (0.5% above base apparently).

    The draw bridge has been pulled up.

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