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UK Property Bulls thread - "the correction may be over"


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UK Property Bulls thread - "the correction may be over"

Let's see both sides & treat the bull view with respect

======================================

 

xxxaw.jpg

 

I am certainly open-minded enough to encourage a thread like this on GEI

 

Let's keep the debate respectful - PT has done a reasonable job of allowing Bearish postings there - so why not some Bulls on GEI?

 

John Doe points the way here, on this posting from No6's Blog...

 

I agree,

 

Recently I have dared to think that we might not get a significant fall in house prices (assuming IRs stay low for a few more years),

but am hesitant to post on the housing threads :unsure: .

 

I know all the arguments, and agree the most likely route is gentle falls for a year or so, but

 

* we are not the US nor Eire

* we have already had a good 20% fall (far greater if using yen, dollars or euros)

* rents are rising due to greater demand from those unable to get mortgages

* BTL is coming back

* housing stock is limited (yes I know the supply / demand depends a lot on mortgage credit etc, but, compared to US/Spain/Eire etc there is not a glut of property nor empty "gohst" estates/towns here)

* and, if you can get a mortgage, the deals are fantastic. This in particular makes me think nice suburbs will weather the storm better than most other areas.

 

I think people waiting for another 20% or more fall could well be disappointed.

 

That said, I also think some could probably find the odd seller willing to sell now with a decent discount.

 

LINKS:

=====

Rental Index : http://www.findaproperty.com/press/rental-index.aspx

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John Doe points the way here, on this posting from No6's Blog...

"rents are rising due to greater demand from those unable to get mortgages"

I agree that RISING RENTS are an interesting and compelling part of the Bull case.

 

I don't expect the rise to continue into 2011, and wonder what other people think?

 

It is easier to get charts for office rents, and they are showing a positive trend now

London_-office-rents-feb162010.jpg

 

===

 

The suggests a positive trend in Residential Rents (in London)

xxxmf.jpg

 

Demand for rental property is booming... (let me finish), according to one lettings agent.

 

The 'Market Monitor' (an impressive-sounding title) from London estate agent Marsh & Parsons shows (above) how many prospective tenants, on average, are 'chasing' each rental property, broken down to give a tally for London overall, and for some segments of the capital.

 

Is it reliable? I can't vouch for it. Its limited by being data from just one firm, but I guess your view on it will be dictated by how much you view estate agents.

 

Anyway, this it what M&P said today: 'The lettings market has swung dramatically in favour of landlords,' it said today, with an average six applicants chasing each home for rent in London versus just two at the market's nadir in April 2009.

. . .

But even if rental demand is picking up, will it last?

Tenants will begin battling with a painful financial squeeze next year - with more tax to pay, fewer and lower benefits and credits to claim (especially for the middle class families of South-West London) and the raised risk of redundancy and pay cuts as the economy feels the drag [More on our financial future: a prediction].

 

But let's put M&P's 'Market Monitor' to the test with a question for our 1.5m monthly readership - tell us, are rents rising in your area? Add your comments below, and place a vote here. (Sept.2010)

 

http://blogs.thisismoney.co.uk/2010/09/cha...-in-london.html

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I agree that RISING RENTS are an interesting and compelling part of the Bull case.

 

I don't expect the rise to continue into 2011, and wonder what other people think?

 

Rising rents are a nightmare...

 

The problem is thus:

 

If rents rise substantially, we face a bigger squeeze on essential spending than previously, this in turn will force up salary requests the obvious problem being the government/BoE is still using fudged numbers to keep CPI at about 3.2%. It also means less discretionary spending on the pointless crap that keeps the economy going!

 

The other big factor is interest rates. Rents are rising because people aren't buying, but what happens when rates eventually start upwards? Yes most western governments are now entrenched in a low term ZERP programme, but that isn't stopping inflation in China going over 10% - that will eventually be exported in consumer goods costs!

 

We also have black swans to consider. If the Yuan loses or re-evaluates its peg to the USD we can expect measured inflation to rise. If QE continues en mass we can expect inflation to rise. The problem isn't inflation per se, it's that there is no countering productivity or GDP gain that is resulting from this spending, if you create more money and more goods/assets/services then that's the holy grail of modern economic balance growth vs. inflation equilibrium. If you slash benifits, cull public sector employment, create a moderate loan enivironment (i.e. one which borrowers are limited to reasonable amounts) and stifle entreprenurial activity you are not creating an environment where higher salary expectations are realistic - and that's the case today.

 

The hardcore BTL bulls will point out that it's a free market and rents are rising because there is more demand, from what i've seen of the rental market in London people are putting in low offers and having them accepted but properties are turning over quite quickly (i.e. lots of places im calling are gone). Just because they are going fast doesn't mean they will stay that way... I suspect the Housing Benifits change from being based on the 50% percentile to the 30% and the changes to cap lmits for London will massively impact the pricing in a lot of areas and may lead to many new properties which were going to NB tennents into private letting.

 

Also one must consider that a lot of the newest properties on the market are those which may have been bought at peak. This means the owners are paying back huge mortgage repayments and some may already be in negative equity and unable to find a buyer. In short i don't think its a huge bull market for rentals, i think it's a starved market in sales combined with legislation changes that will be the long term factors.

 

This recent rise must be just a blip before the affordability implications are felt, otherwise we're going to have massive public and private sector pay demands and subsequent strikes despite the layoffs. On the one hand inflation is everywhere, but rent is most individual or families single biggest monthly expense - if that goes up substantially it affects almost everyones budget.

 

 

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There is a lot of bullish propaganda regarding rising rents, which has a core of truth to it. Rents are rising due to increased demand from private tenants. IMO this is not bullish in the medium to long term. Rental yields are still too low to cover all the costs and give a good return for BTL to look like a good investment. Private demand has risen because so few people are buying. See here for the evidence of how little mortgage lending is flowing into property in comparison to the past.

 

If, as is claimed, rents are more expensive than mortgages at current level then this simply indicates that mortgage rates are too low too. Which as we all know, they are. If both are unaffordable to many, which as we know they are, then that says prices are too high. The bullish argument rests on the idea that recent develops are due to the operation of the free market mechanism. Given what we know about the benefit subsidies that have been flowing into private rental over the last few years and the continuation of artificially low rate for existing mortgage holders we know that the current situation has nothing to do with a free market. The UK government has a simple choice: continue to support property though both explicit and implicit subsidy at the expense of the productive economy and the majority of the population or remove these subsidies in a controlled way, with the inevitable consequences. I think it's pretty clear which course has been chosen.

 

 

 

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"Recently I have dared to think that we might not get a significant fall in house prices (assuming IRs stay low for a few more years),

but am hesitant to post on the housing threads .

I know all the arguments, and agree the most likely route is gentle falls for a year or so, but..."

- John Dow, above.

 

Hey, John Dow.

It is great to have a different point of view, and express it here.

BUT WHY NOT BACK IT UP WITH DATA?

 

Hey, if I can do it from Hong Kong, you can do it from the UK.

You will win more over to your point of view, if you do that.

========================

 

 

... and I will try to help you out with some data from this source:

 

 

September Rental Index - FindAProperty -

 

Rental prices continue to rise

Asking prices for rental properties have risen 1.4% between June and September this year. The average rent is

now £851pcm, the highest it’s been since November 2008. Rental prices have been steadily rising since January with

landlords now asking £47 more per month than at the start of the year – an increase of 5.8%.

 

Stock shortage drives up yields

The amount of available rental stock has fallen by 14.5% since June and is now 38% lower than the peak it

reached in May 2009. This shortage has led to the increase in asking prices and pushed average rental yields up to

4.69% - their highest level since October 2008.

 

A landlord’s market?

In tandem with falling stock levels, the time properties remain on the market is also decreasing indicating that

demand remains high and is therefore a good market for those looking to let a property. The average rental property

remains on the market for 49 days which is the second shortest length of time since

. . .

London

Rent in London increased at the highest rate of any regions, by 5.1% between June and September. In the

last 12 months, rental prices in London have increased by £208pcm to £1,818pcm, an increase of 12.9%. Rental

prices are now higher than at any time since the index was started in January 2008.

 

Stock levels have fallen by 15% over the last quarter and rental yields in the capital are now at 5.1% - the

second highest in the UK.

 

/more: http://www.findaproperty.com/media/rental-...x_Q3_Sep_10.pdf

 

Q3-2010 REPORT / Findaproperty.com

=================== : = SE, England = : == Gr. London =

=================== : Jun 10 : Sep 10 / Jun 10 : Sep 10 /

Ave. Rental Asking Price. : 1,089 : 1,122 : 1,729 : 1,818

Ave. Sales Asking Price.. : 279.8 : 276.1 : 440.1 : 425.3

Average Rental Yield..... : 4.67%: 4.88% : 4.71%: 5.13%

 

/see: http://www.findaproperty.com/media/rental-...x_Q3_Sep_10.pdf

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September Rental Index - FindAProperty -

 

Rental prices continue to rise

Asking prices for rental properties have risen 1.4% between June and September this year. The average rent is

now £851pcm, the highest it’s been since November 2008. Rental prices have been steadily rising since January with

landlords now asking £47 more per month than at the start of the year – an increase of 5.8%.

 

Stock shortage drives up yields

The amount of available rental stock has fallen by 14.5% since June and is now 38% lower than the peak it

reached in May 2009. This shortage has led to the increase in asking prices and pushed average rental yields up to

4.69% - their highest level since October 2008.

 

In the UK, the Coalition government's cap on housing benefit will, imo, cause a general downward pressure on rents. High LTV requirements will continue to keep first time buyers out of the market.

 

I can only see a second leg down in the housing market.

 

It's yesterday's bubble asset.

 

Not a place where I would want to risk speculative cash. Okay only as a needs must purchase.

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If, as is claimed, rents are more expensive than mortgages at current level then this simply indicates that mortgage rates are too low too. Which as we all know, they are. If both are unaffordable to many, which as we know they are, then that says prices are too high. The bullish argument rests on the idea that recent develops are due to the operation of the free market mechanism. Given what we know about the benefit subsidies that have been flowing into private rental over the last few years and the continuation of artificially low rate for existing mortgage holders we know that the current situation has nothing to do with a free market. The UK government has a simple choice: continue to support property though both explicit and implicit subsidy at the expense of the productive economy and the majority of the population or remove these subsidies in a controlled way, with the inevitable consequences. I think it's pretty clear which course has been chosen.

Very nicely put.

 

I found it interesting that Pidgley is looking at moving the house builder Berkeley into rental properties and away from their traditional markets.

http://www.building.co.uk/news/finance/ber...5008084.article

 

I have followed his comments for years and found him to be one of the best market readers in the business.

 

While I wouldn't consider BTL myself, for companies like this, the rental market could offer some potentially lucrative returns in the current environment and the years to come.

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I found it interesting that Pidgley is looking at moving the house builder Berkeley into rental properties ...

I have followed his comments for years and found him to be one of the best market readers in the business.

I understand that he uses Fred Harrison's 18 year cycles in his forecasts

 

== ==

My quick perusal of the following data suggests that rentals simply LAG behind price changes.

What's the common wisdom on this relationship ?

 

Also, the rental "count" - which is a measure of available supply has been diminishing, which may be a sign that the pressure for higher rents is continuing. At the moment, this indicator does not point towards falling rents in the UK.

 

RENTAL, and price data

 

Yields=: === Rightmove === // ==== Gr. London ===== : ==== SE, England ==== : / Other London Rents = = = :

===== : UKwide : GrLondon // AskPrice : Rental : Yield% : AskPrice : Rental : Yield% / Kens: Wand: Eal'ng: Grwch

'08 -Feb.: 200,000 : 400,000 // 430,000e. 1,767 : 5.00% : 2==000 : 1,131 : 5.= % / 3,574 : 1,850 : 1,646 : 1,221 - earliest data

=====

2008mar: 239,655 : 407,383 // 430,000e 1,764 : 4.92% : 2==000 : 1,151 : 5.= % / 3,526 : 1,866 : 1,523 : 1,226

'08 -Jun.: 239,564 : 399,010 // 425,000e. 1,714 : 4.84% : 2==000 : 1,125 : 5.= % / 3,374 : 1,808 : 1,591 : 1,215

'08 -Sep.: 227,438 : 394,248 // 420,000e. 1,702 : 4.86% : 2==000 : 1,131 : 5.= % / 3,286 : 1,770 : 1,XXX : 1,246

'08 -Dec.: 217,808 : 391,721 // 415,000e. 1,684 : 4.87% : 2==000 : 1,092 : 5.= % / 3,228 : 1,668 : 1,XXX : 1,305

2009mar: 218,081 : 398,867 // 402,412 : 1,650 : 4.92% : 259,752 : 1,066 : 4.93% / 3,183 : 1,646 : 1,523 : 1,296

'09 -Jun. : 226,436 : 397,140 // 414,590 : 1,625 : 4.70% : 269,314 : 1,080 : 4.81% / 3,217 : 1,643 : 1,536 : 1,247

'09 -Sep.: 223,996 : 390,768 // 432,107 : 1,610 : 4.47% : 272,405 : 1,090 : 4.80% / 3,321 : 1,624 : 1,XXX : 1,165

'09 -Dec.: 221,463 : 398,426 // 434,923 : 1,651 : 4.56% : 273,198 : 1,083 : 4.76% / 3,403 : 1,588 : 1,XXX : 1,236

2010mar: 229,614 : 417,461 // 437,464 : 1,685 : 4.62% : 274,185 : 1,061 : 4.64% / 3,482 : 1,669 : 1,627 : 1,184

'10 -Jun. : 237,767 : 429,597 // 440,136 : 1,729 : 4.71% : 279,793 : 1,089 : 4.67% / 3,625 : 1,738 : 1,621 : 1,171

'10 -Sep.: 229,767 : 399,019 // 425,259 : 1,818 : 5.13% : 276,081 : 1,122 : 4.88% / 3,730 : 1,819 : 1,659 : 1,248

'10 -Dec.:

 

=== MONTHLY

Mon.: Rt'move : London= : UK-wide ======= : ==== Gr. London ==== :

2008 ===== : ======= : Rent: count/ Yield% : AskPrice : Rental : Yield% : xUKr

J. : : 230,428 : 398,476 : 873 : 100.0 : 4.55% :

F : : 237,856 : 402,233 : 872 : 120.3 : 4.40% :

M : : 239,655 : 407,383 : 873 : 132.8 : 4.37% : 430,000e 1,764 : 4.92% : 2.021

A : : 239,521 : 403,545 : 873 : 145.5 : 4.37% :

M : : 242,500 : 404,541 : 867 : 166.7 : 4.29% :

J. : : 239,564 : 399,010 : 869 : 189.8 : 4.34% : 425,000e 1,714 : 4.84% : 1.972

Jl : : 235,219 : 400,258 : 868 : 212.8 : 4.43% :

A : : 235,219 : 379,162 : 871 : 236.5 : 4.44% :

S : : 227,438 : 394,248 : 867 : 240.4 : 4.44% : 420,000e 1,702 : 4.86% : 1.963

O : : 229,691 : 395,560 : 830 : 295.6 : 4.33% :

N : : 222,979 : 390,340 : 831 : 289.9 : 4.40%

D : : 217,808 : 391,721 : 845 : 302.1 : 4.44% : 415,000e 1,684 : 4.87% : 1.993

 

2009 ===== : ======= : Rent: count/ Yield% : AskPrice : Rental : Yield% : xUKr

J. : : 213,570 : 386,653 : 840 : 316.9 : 4.72% : 402,000e 1,667 : 4.98% : 1.985

F : : 216,163 : 387,988 : 830 : 344.3 : 4.61% : 403,940 : 1,669 : 5.00% : 2.011

M : : 218,081 : 398,867 : 827 : 350.9 : 4.55% : 402,412 : 1,650 : 4.92% : 1.995

A : : 222,077 : 387,161 : 819 : 355.1 : 4.43% : 406,144 : 1,623 : 4.80% : 1.982

M : : 227,441 : 397,646 : 823 : 364.7 : 4.33% : 412,674 : 1,630 : 4.74% : 1.981

J. : : 226,436 : 397,140 : 823 : 363.0 : 4.34% : 414,590 : 1,625 : 4.70% : 1.974

Jl : : 227,864 : 402,761 : 825 : 358.5 : 4.34% : 427,886 : 1,611 : 4.52% : 1.953

A : : 222,762 : 387,265 : 829 : 329.3 : 4.47% : 427,691 : 1,601 : 4.49% : 1.931

S : : 223,996 : 390,768 : 829 : 329.0 : 4.44% : 432,107 : 1,610 : 4.47% : 1.942

O : : 230,184 : 416,157 : 830 : 295.6 : 4.33% : 436,163 : 1,636 : 4.50% : 1.971

N : : 226,440 : 403,069 : 831 : 289.9 : 4.40% : 437,634 : 1,640 : 4.50% : 1.973

D : : 221,463 : 398,426 : 820 : 290.0 : 4.44% : 434,923 : 1,651 : 4.56% : 2.013

 

Mon.: Rt'move : London :

2010

J. : : 222,261 : 407,731 : 804 : 292.5 : 4.34% : 432,898 : 1,651 : 4.58% : 2.053

F : : 229,398 : 427,987 : 812e 2XX.X : 4.24% : 436,101 : 1,673 : 4.60% : 2.060

M : : 229,614 : 417,461 : 820 : 270.0 : 4.29% : 437,464 : 1,685 : 4.62% : 2.055

A : : 235,512 : 421,822 : 826 : 2XX.X : 4.21% : 436,466 : 1,696 : 4.66% : 2.053

M : : 237,134 : 420,203 : 833e ==== : 4.22% : ====== : 1,712e

J. : : 237,767 : 429,597 : 839 : 263.0 : 4.23% : 440,136 : 1,729 : 4.71% : 2.061

Jl : : 236,332 : 422,248 : 843e ==== : 4.28% : ====== : 1,760e

A. : : 232,241 : 405,058 : 847e ==== : 4.38% : ====== : 1,785e

S. : : 229,767 : 399,019 : 851 : 225.0 : 4.44% : 425,259 : 1,818 : 5.13% : 2.136

O : : 236,849 : 418,778 :

N : : 229,379 : 417,279 :

==================

 

DEMAND up, Supply down:

Stock shortage drives up yields

The amount of available rental stock has fallen by 14.5% since June and is now 38% lower than the peak it reached in May 2009. This shortage has led to the increase in asking prices and pushed average rental yields up to 4.69% - their highest level since October 2008.

A landlord’s market?

In tandem with falling stock levels, the time properties remain on the market is also decreasing indicating that demand remains high and is therefore a good market for those looking to let a property. The average rental property remains on the market for 49 days which is the second shortest length of time since the index started in January 2008.

- Sept.2010 comment

 

/ see archive: http://www.findaproperty.com/press/rental-index.aspx

/ background : http://www.findaproperty.com/rental-index-video.aspx

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I understand that he uses Fred Harrison's 18 year cycles in his forecasts

 

I read Boom Bust a few years ago, good read.

 

Also liked the idea of a property tax replacing income tax etc, although, realistically, I don't think it will ever happen.

 

The depression of 2010 that Harrison suggested, was averted by massive intervention (I emphasise averted and don't accuse him of necessarily being wrong).

 

It is this ability of interested parties to act in this way and avert what should/would have happened that makes me question the fundamentals in more detail now.

 

 

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The depression of 2010 that Harrison suggested, was averted by massive intervention (I emphasise averted and don't accuse him of necessarily being wrong).

 

It is this ability of interested parties to act in this way and avert what should/would have happened that makes me question the fundamentals in more detail now.

DELAYED, not averted, I think.

 

The overvaluation is still there, but ultra-low rates have temporarily disguised the valuation problem IMHO.

 

Rising rents, make it seem less overvalued, and if those rents hold, then maybe the problem has been averted to some extent.

 

I am looking into RENTS in this thread to get a deeper understanding of what is happening.

I suppose I will need to compare rents with incomes also.

 

It would be great to have some help in this task, which is more useful to many in the UK than me in HK.

(I suppose that I am Santa Claus. But maybe these data "gifts" are of little interest here.)

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...

 

I found it interesting that Pidgley is looking at moving the house builder Berkeley into rental properties and away from their traditional markets.

http://www.building.co.uk/news/finance/ber...5008084.article

...

 

Moving housebuilders towards this model could make them massively less cyclical, it could also help with longer-term strategy as a proportion of your income is contracted and therefore more stable; reducing cash flow risks.

 

In good times for sale prices it will be seen as capital tied up that could be better used elsewhere, so would they hold their nerve and keep them for the bad times?

 

The article indicates not. It's worth noting that it's the lettings side that's saved many an EA this time round.

 

I'm still yet to be convinced that rental demand is feeding in any significant way into increased rental prices, though I would expect voids to be down which helps yields. The latest FindAProperty rental index is missing some better time-series index graphs that used to be in the previous ones, see link to the Jan 2010 release

 

http://www.findaproperty.com/media/rental-...ndex_Jan_10.pdf

 

It looks like is might be recovering from the 2009 lows, but still 4-5% below early 2008.

 

I couldn't find any better rental price data, Gumtree produced something that looked interesting in Q2 2009, but have not repeated it.

 

I would also be interested in people's view on the possible psychology differences between the purchase and rental markets. I'd expect the purchase market to focus on the output as it's a long-term decision (i.e. I want a 3 bed house with a garage) and the rental market to focus on the input (i.e. what can I get for £1000 per month).

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Telegraph: Buy to let landlords enjoy fat profits from the mortgage famine

 

http://blogs.telegraph.co.uk/finance/ianmc...ortgage-famine/

 

James Moss, managing director of Curzon Investment Property, said: “The main reason we’re destined to stay a nation of renters is that Government promises to unlock the mortgage market and build more homes have been broken. The market is being choked off at both ends and a combination of throttled lending and fractured supply means prices are kept high and people can’t borrow enough. New local planning laws which give Nimbys the right veto much needed development are the nail in the coffin.”
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It is still "tight" out there...

 

'Bidding war' for homes to rent

 

People looking for houses to rent in many parts of the UK are encountering a new hurdle in their hunt for a home.

 

Landlords, or more often their letting agents, are increasingly asking would-be tenants to compete by making "sealed bid" offers for the home they want.

. . .

London has experienced the biggest rise in rents, but other regions are not immune. More than a third of landlords surveyed by the National Landlords Association said they were seeing higher rents in Wales, Scotland and the North West of England.

 

Research to be published on Monday by the property website RightMove is expected to find that 55% of renters were "trapped" - wanting to leave rented accommodation, but finding themselves unable to do so.

 

Rental costs 'continue to rise'

James Moss, a director of Curzon Investment Property, said that without access to finance, buyers could not purchase homes.

 

"Combine this with rising student fees and job losses across the public sector, and what we are left with is facing up to being a nation of renters as the home buying dream is eroded," he said.

 

/more: http://www.bbc.co.uk/news/business-11796277

 

*"without access to finance, buyers could not purchase homes"

Ugh - I dislike this sort of comment. It assumes buyers are brain-dead, and if you simply give them "access to finance", then they will buy without regard to the price. Some folks may be like that, but many will simply not buy when the price is too high.

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Cameron replied: "Find me a street in your constituency and let's go down it together and let's ask people earning £20,000, £25,000, £30,000, whether they are happy to be paying towards people whose rent bills are £30,000, £40,000, £50,000 living in central London.

 

"I think that is more likely, frankly, to lead to social unrest when people find out how much money they're paying in taxes for people to live in houses they couldn't dream of living in themselves." Cameron said housing benefit had risen by 50% in the last five years. "Everyone accepts it's out of control and you've got to take some steps to deal with it," he said.

 

http://www.guardian.co.uk/society/2010/nov...fit-questioning

 

 

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http://www.guardian.co.uk/society/2010/nov...fit-questioning

"I think that is more likely, frankly, to lead to social unrest when people find out how much money they're paying in taxes for people to live in houses they couldn't dream of living in themselves." Cameron said housing benefit had risen by 50% in the last five years. "Everyone accepts it's out of control and you've got to take some steps to deal with it," he said.

I AGREE completely -

But unfortunately for renters, Rents have gone on rising.

 

Anyone who does rent should hope that the forthcoming cap on Housing benefits will bring rents down, but I can see no evidence of that yet.

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Some of the recent data in the linked articles seems to have come from a company called LSL Property Services PLC.

 

http://www.lslps.co.uk/

 

I've done a bit of background reading on them and they actually look like a very effective business. They own a few national EA brands; Reeds Rains, Your Move and recently purchased Halifax EA, a few national surveying businesses and a couple of asset management businesses (rental management and asset disposal, including repo management). If the Half Year statement and Interim Management Statement are to be believed (on the link below), they'll have a cracking year, which is not bad considering residential sales volumes must be down massively compared to 3 or 4 years ago (by their own estimates in the Statement; 50% of 'normal' volume).

 

http://www.lslps.co.uk/investors_regulatory.html

 

LON:LSL could be a decent play when you're bullish on sales volumes picking up.

 

Their Your Move brand hosts the press releases including their buy-to-let index, which includes rental prices if you can make out the rather small graph.

 

http://www.your-move.co.uk/news.aspx

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90% of people on this board are talking about high inflation.

Rents therefore can only go up along with everything else if the inflationistas are correct.

AAK,

That's not true. Now that state-supported Housing Benefits are capped (thank Goodness!),

rents can only continue to rise, if Incomes rise. Do you see that happening?

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90% of people on this board are talking about high inflation.

 

Rents therefore can only go up along with everything else if the inflationistas are correct.

 

Rents can only rise in a stable fashion with wage inflation. Wage inflation can only take place with high employment and GDP growth, we currently have neither.

 

If rents do continue to rise we face rising costs (alongside energy, taxes, food etc.) putting further pressure on limited discretionary spending - which means the more rents rise, the more likely it becomes that we face either another huge recessionary pullback or a long period of stagnation.

 

In the inflationary scenario rents only rise as a final stage response to rising costs, rising inflation and rising interest rates. We have the first part but not rising interest rates, rates going up also put downwards pressure on housing prices changing the rent vs. buying affordability calcuations. But we aren't there yet.

 

I think rents rising now are a response to lack of buying and to more properties that were bought at peak going on the market, the mortgage overhead costs were substantial and that's being passed on in the form of higher rents where people cannot sell their homes. Most properties weren't purchased at peak prices, so i expect we'll have some real divergence between those who are professional LL/BTL that purchased some years ago and can afford lower returns to cover costs and those simply forced to let because they have to move (for work, schools etc) but cannot offload their properties in the current market - the later will be those making little or no profits from letting.

 

As the ConLib policy changes in the UK relating to HB start to come into effect it will put downards pressure on rents as those claiming HB to support their rents will be more limited in their borrowing thus forcing LL to either change their rents lower or get new tennents that don't need HB support thus a higher volume of rentals appearing on the open market.

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Rents can only rise in a stable fashion with wage inflation. Wage inflation can only take place with high employment and GDP growth, we currently have neither.

 

If rents do continue to rise we face rising costs (alongside energy, taxes, food etc.) putting further pressure on limited discretionary spending - which means the more rents rise, the more likely it becomes that we face either another huge recessionary pullback or a long period of stagnation.

RIGHT!

I think this is what the coalition is counting on:

If they can get Rents down, then spending on other items can rise ! That would help the economy.

Excessive Housing benefits, just costs taxpayers extra money, and put pounds in the pockets of BTL landords

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