Tuesday, Jan 13, 2015

How landlords benefit from the rest of us

FT: Landlords make £177bn from rising house prices over 5 years

The value of the stock of privately rented property in place in 2009 has increased by £177bn, and there's a further increase of £247bn in the value of the stock that's newly rented since 2009 (that includes stuff that's only recently been rented and valued). The value of all privately rented property has increased by 57% during the period while owner occupiers have seen rises of just 20% (those without a mortgage) or 5% (those with a mortgage). All thanks to low house building and high prices for would-be FTBs forced to rent - and to HB payments to private landlords (up from £3.4bn in 1998 to £9.3bn in 2014). Generation Rent's man says " despite these huge returns (to landlords) private sector tenants get the worst living conditions, the worst security of tenure".

Posted by icarus @ 03:02 PM (4229 views)
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1. icarus said...

Those without a subscription seem to be able to access this content. Hope so anyway.

Tuesday, January 13, 2015 03:04PM Report Comment

2. reticent said...

Good stats. Cheers Icarus.

Tuesday, January 13, 2015 03:37PM Report Comment

3. mombers said...

To view the article without a subscription, just google 'UK landlords make £177bn from rising house prices over 5 years'. ft.com will let you in if it comes from a search engine. Works with a number of the looser paywalls, e.g. nytimes

Tuesday, January 13, 2015 03:42PM Report Comment

4. icarus said...

How much do tougher mortgage rules keep down house prices when they simply force people into renting and drive up the values of the properties they rent? Affordability? Most renters can't really afford to rent.

Tuesday, January 13, 2015 10:51PM Report Comment

5. reticent said...

@4 That rather gets to the heart of the BTL problem, IMO. It's a vicious cycle.

The most amazing thing I've learned study macroeconomics is that GDP includes the theoretical rental value of all property in a country. It makes up as much as 20% of GDP. So, if you have a country where:

-the rental market is largely unregulated (zero rent controls)
-owner occupation is lowest amongst young professionals with lots of disposable income
-a significant proportion of homeowners could not afford the rental value of the homes they own
-those who can't afford to rent property have their rents paid by the govt., at unregulated market rates

So, in the UK, the imputed rental value of the properties is likely to be much higher than the population could afford to pay if they were all forced to rent. Conversely, somewhere like Germany, those who own would be much more likely to afford the rents they're supposedly paying themselves, which are contributing to GDP.

So, basically, GDP is probably overstated in the UK relative to Germany and the BTL racket flatters our GDP figures not just by adding to landlords' incomes but homeowners' incomes as well.

Plus, a significant proportion of the economic contraction and GDP rebound can be attributed to the dip and subsequent rise in rents that we have seen since 2007.


Wednesday, January 14, 2015 11:22AM Report Comment

6. E ≈ 2. 7183 said...

@5: Not so. It makes little difference to GDP if a house is owner occupied or rented. The treatment of owner-occupied housing in the GDP is comparable to that of tenant-occupied housing, so it matters not if one or the other sector grows or shrinks.

Wednesday, January 14, 2015 04:38PM Report Comment

7. reticent said...

@6 You appear to have missed my point.

Changes in the UK housing market have led to higher rents and house prices than many other developed countries (eg Germany). The fact that the pool of renters is small and growing amongst affluent young professionals is just one of those changes. So, in the UK, Australia and other places where rents are especially high, GDP comes out higher than in places where rents are low.

Most baby boomers cannot afford to rent their primary residences at the going rate. Most German owner occupiers can. Our GDP figures are therefore flattered by the high rents EVERYONE is supposedly paying, but in practice only non-HB tenants are.

Friday, January 16, 2015 03:18PM Report Comment

8. E=2. 7183 said...

Thanks for clarifying but the effect you discuss is more neutral than you might think because of value reductions reductions caused by new maintenance and repair calculations. There are also areas where the UK underestimates values in comparison to competing countries. Our key service industry is generally considered to be underestimated and the creation of knowledge assets remains largely uncaptured in the UK. On balance, the UK GDP is probably understated.

Friday, January 16, 2015 06:29PM Report Comment

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