crushtherents Posted November 23, 2010 Report Share Posted November 23, 2010 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. Link to comment Share on other sites More sharing options...
crushtherents Posted November 23, 2010 Report Share Posted November 23, 2010 top post Link to comment Share on other sites More sharing options...
aliveandkicking Posted November 23, 2010 Report Share Posted November 23, 2010 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? In an inflationary depression sooner or later all things will rise in price. It then comes down to what does not rise in price much and what rises in price strongly. As i already pointed out, in China a significant group of workers just got double wage increases and the poorest got 20% increases. And you can imagine that by the time ireland belgium portugal spain and even italy are bailed out there will be a fair amount of money sloshing around. 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 Taking money away from one part of the economy to give it to another part of the economy is not going to create a stimulus. People on housing benefits dont target their spending to 'back Britain' anymore than landlords target their spending on overseas products and holidays. If rents fell then house prices will fall and the wealth effect will destroy spending. For all my annoyance with Goldfinger we are on the same page that there is no solution and the only solution is to spend their way out of the hole rather than the more terrifying cut spending and allow economic collapse scenario. Link to comment Share on other sites More sharing options...
tallim Posted November 23, 2010 Report Share Posted November 23, 2010 ... 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. I've done some research into the effect of the GBP400 per week cap on England. https://lha-direct.voa.gov.uk/ Local Housing Allowance (LHA) is calculated by gathering rental prices for 6 types of housing; + 1 Room + 1 Bed + 2 Bed + 3 Bed + 4 Bed + 5 Bed The data is split into geographic regions termed Broad Rental Market Areas (BRMA), there are 152 BRMAs in England, the geographic size of the BRMA is roughly related to the population density. The median of the data for each housing type and BRMA is then used to set the level of LHA that can be paid. Eligibility for housing type is assessed on the number of people proposed to live in the house, there 7 categories of person; + Adult Couples + Adult (16+) Single Male + Adult (16+) Single Female + Children (10-15) Male + Children (10-15) Female + Children (Under 10) Male + Children (Under 10) Female There are various rules about bedroom sharing that are used to determine the number of bedrooms that the household will be provided with. There is a calculator tool on the LHA website. Examples include; + Adult single = 1 Bed or 1 Room if under 25 (this threshold is rising to 35 in the near future) + A couple with an under 10 child = 2 Beds + A couple with a 10-15 child and an under 10 child of the same gender = 2 Beds + A couple with a 10-15 child and an under 10 child of different genders = 3 Beds + A couple, adult single male, 10-15 female and under 10 male = 4 Beds etc... The current LHA rates are published on the LHA website along with supporting data in the area of the website known as the List of Rents Per BRMA per Housing Type + Number of rental properties included in data set + Minimum price found + Maximum price found + Median price calculated + Graph showing the total data set Using this data I have completed this assessment of the impact of the GBP400 cap. Of the 152 BRMAs; 24 will be impacted by the cap on 5 Bedroom houses; 2000.00 Central London 905.00 Inner West London 775.00 Inner South West London 735.44 Chilterns 700.00 Inner North London 644.38 Guildford 632.88 Walton 609.86 Outer South West London 575.34 South West Herts 570.00 Inner East London 563.84 East Thames Valley 550.00 Outer North London 520.00 Inner South East London 483.29 High Weald 459.12 South East Herts 448.77 North West London 448.77 Outer North East London 418.85 Brighton & Hove 414.25 Aylesbury 414.25 Blackwater Valley 414.25 Crawley & Reigate 414.25 Newbury 402.74 Outer South London 400.44 Harlow & Stortford 7 will be impacted by the cap on 4 Bedroom houses; 1000.00 Central London 580.00 Inner North London 550.00 Inner South West London 540.00 Inner West London 450.00 Inner East London 414.25 Outer South West London 402.74 Inner South East London 2 will be impacted by the cap on 3 Bedroom houses; 750.00 Central London 435.00 Inner North London 1 will be impacted by the cap on 2 Bedroom houses; 500.00 Central London 0 will be impacted by the cap on 1 Bedroom houses. Other Trivia The mean of all 5 Bedroom rates across the 152 BRMAs in England is 308.03 The median of all 5 Bedroom rates across the 152 BRMAs in England is 253.15 The 1 Bedroom rate in Central London (350.00) is more than the 5 Bedroom rate in 117 of the 152 other BRMAs The 10 lowest 5 Bedroom rates are; 169.72 Grimsby 166.85 Hull & East Riding 166.85 Scarborough 166.85 West Cumbria 166.85 Wigan 161.10 Lincolnshire Fens 161.10 North Cumbria 159.95 Barnsley 155.34 Bradford & South Dales 146.71 Wolds and Coast Conclusions + The maximum Local Housing Allowance cap at GBP400 per week will only impact regions in the South of England + The largest impact will be focused on London and Surrey + 95% of the impact will be on 5 Bedroom house rates only My personal opinion is that the cap will have minimal impact on general rent levels for the bulk of the population. It will take further reforms of LHA, to impact the broader market. The planned change to setting the price across all rates at the 30th percentile rather than the median will be much more significant. Link to comment Share on other sites More sharing options...
fitkid Posted November 23, 2010 Report Share Posted November 23, 2010 I've done some research into the effect of the GBP400 per week cap on England. https://lha-direct.voa.gov.uk/ Local Housing Allowance (LHA) is calculated by gathering rental prices for 6 types of housing; + 1 Room + 1 Bed + 2 Bed + 3 Bed + 4 Bed + 5 Bed The data is split into geographic regions termed Broad Rental Market Areas (BRMA), there are 152 BRMAs in England... EXCELENT post thanks for going to the trouble of collecting and calculating the data.I have been having various conversations with landlords ref the above and was going to do what you have done above to clearly (as is possible with government data) identify POSSIBLE outcomes geographically for the caps. CHEERS. Link to comment Share on other sites More sharing options...
John Doe Posted November 23, 2010 Report Share Posted November 23, 2010 Great work/post Tallim. I had heard that the cap could be modified depedning on the area. Do you know if this is going ahead or planned? (Here, even in the best bits of Glasgow, £400 a week gets you a fantastic pad) Link to comment Share on other sites More sharing options...
DoctorSolar Posted November 23, 2010 Report Share Posted November 23, 2010 (Here, even in the best bits of Glasgow, £400 a week gets you a fantastic pad) Yep but as tallim points out: The planned change to setting the price across all rates at the 30th percentile rather than the median will be much more significant. Whats the 30th percentile of rents in Glasgow? I lived there for many years until recently and know that it absolutely nowhere close to 400 per week. 500 per month got me a lovely 2 bed pad in the west end. Link to comment Share on other sites More sharing options...
John Doe Posted November 23, 2010 Report Share Posted November 23, 2010 Yep but as tallim points out: Whats the 30th percentile of rents in Glasgow? I lived there for many years until recently and know that it absolutely nowhere close to 400 per week. 500 per month got me a lovely 2 bed pad in the west end. Probably looking at £650 now for a nice 2 bed in W.End, more for a real nice one. Min would be £550 (unless down at fringes of Partick etc where might get slightly lower) For Glasgow as a whole, it will depend on area. As you know, W.End vs Goven etc etc Link to comment Share on other sites More sharing options...
DoctorSolar Posted November 23, 2010 Report Share Posted November 23, 2010 Probably looking at £650 now for a nice 2 bed in W.End, more for a real nice one. Min would be £550 (unless down at fringes of Partick etc where might get slightly lower) For Glasgow as a whole, it will depend on area. As you know, W.End vs Goven etc etc The critical thing as tallim points out is its not the overall cap its the move to only giving you a maximum of the 30th percentile of rents in the area where you live. If you just look at the west end of Glasgow in isolation the 30th percentile will be no where close to 400 per week. So any landlords getting a hardon thinking they can scoop 400 a week from housing benefits payments regardless of where they are located are living in cloud coocoo land. Link to comment Share on other sites More sharing options...
drbubb Posted November 24, 2010 Author Report Share Posted November 24, 2010 SIGNS OF WEAKNESS More signs that Property Bullishness is fading - though we don't see it in rents yet 1/ News - Weakness in London property prices 2/ Shares - Builders under pressure foreshadows price slides BDEV / Barratt Development .. update : PSN : BKG : TW 3/ Falling internet Traffic on Landlord-oriented website suggests less investor interest COMPARISON SingingPig Alexa Traffic Rank: 112,890 / Traffic Rank in GB: 6,295 / Sites Linking In: 59 GreenEnergyInvestors Alexa Traffic Rank: 205,401 Traffic Rank in GB: 6,646 Sites Linking In: 34 / 5 Stars But look what is happening recently: Link to comment Share on other sites More sharing options...
John Doe Posted November 24, 2010 Report Share Posted November 24, 2010 The critical thing as tallim points out is its not the overall cap its the move to only giving you a maximum of the 30th percentile of rents in the area where you live. If you just look at the west end of Glasgow in isolation the 30th percentile will be no where close to 400 per week. So any landlords getting a hardon thinking they can scoop 400 a week from housing benefits payments regardless of where they are located are living in cloud coocoo land. Yes, and I agree with the 30th percentile, but even so, I don't think many will be hit in the W.End as the rents (for example for 2 bed flats) are all roughly within a band between 500 and 650 (per month that is! for those readers in London). So if the difference is only a few tens of pounds, it's conceivable that either people will pay the difference or landlords can reduce slightly. Saying that, there aren’t many DSS tenants in the W.End compared with other areas. Also, I've been told that other parts of Glasgow still have quite a few council properties, so less private landlords with DSS tenants. Link to comment Share on other sites More sharing options...
InternationalRockSuperstar Posted November 24, 2010 Report Share Posted November 24, 2010 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. whatever. ... Housing/Rents as a Percentage of Household spending WEIMAR - Living Costs, Family of Four Weekly Cost : Total in Marks : - - - - Percentages - - - - ========== . . . . . . . . . . . : Food / Housing / Clothing 1914 (prewar) : ............ 21.5 : 46.5%/. 25.6% / .. 27.9% January 1920 : .............. 164 : 52.4%/. 04.9% / .. 42.7% January 1921 : .............. 218 : 63.8%/. 04.1% / .. 32.1% January 1922 : .............. 396 : 64.8%/. 02.8% / .. 32.3% July...... 1922 : ............ 1232 : 56.8%/. 01.1% / .. 42.0% January 1923 : .......... 25,123 : 52.1%/. 01.2% / .. 46.7% July...... 1923 : ........ 654,608 : 59.8%/. 00.4% / .. 39.8% Nov. ..... 1923 : ... 14.408 Bn. : 64.9%/ 00.26% / .. 34.8% source: Hyperinflation handout Here it is : 0.26%, in Nov.1923, down from 25.6% in 1914. That's 1/100th of its original percentage - an enormous collapse !! ... Link to comment Share on other sites More sharing options...
thickmick Posted November 24, 2010 Report Share Posted November 24, 2010 ... Housing/Rents as a Percentage of Household spending WEIMAR - Living Costs, Family of Four Weekly Cost : Total in Marks : - - - - Percentages - - - - ========== . . . . . . . . . . . : Food / Housing / Clothing 1914 (prewar) : ............ 21.5 : 46.5%/. 25.6% / .. 27.9% January 1920 : .............. 164 : 52.4%/. 04.9% / .. 42.7% January 1921 : .............. 218 : 63.8%/. 04.1% / .. 32.1% January 1922 : .............. 396 : 64.8%/. 02.8% / .. 32.3% July...... 1922 : ............ 1232 : 56.8%/. 01.1% / .. 42.0% January 1923 : .......... 25,123 : 52.1%/. 01.2% / .. 46.7% July...... 1923 : ........ 654,608 : 59.8%/. 00.4% / .. 39.8% Nov. ..... 1923 : ... 14.408 Bn. : 64.9%/ 00.26% / .. 34.8% source: Hyperinflation handout Here it is : 0.26%, in Nov.1923, down from 25.6% in 1914. That's 1/100th of its original percentage - an enormous collapse !! ... That's an incredible set of statistics! Maybe it's true that a former bell-boy was able to buy the hotel he used to work in for 1 gold coin Link to comment Share on other sites More sharing options...
drbubb Posted November 25, 2010 Author Report Share Posted November 25, 2010 That's an incredible set of statistics! Maybe it's true that a former bell-boy was able to buy the hotel he used to work in for 1 gold coin It shocked me too, when I found the data. I think it also shows the problem in raising rents in a hyperinflationary economy. Gonzalo Lira spoke about one of his uncles was given a chance to swap a secondhand car for a nice flat. People do not understand that hyperinflation greatly distorts "normal" price relationships, as people panic and seek to sell everything they can to buy essentials and convert their "wealth" into something they can get out of the country being devastated by currency destruction. I wonder how many BTL landlords will get hit with this surprise. Link to comment Share on other sites More sharing options...
fitkid Posted November 25, 2010 Report Share Posted November 25, 2010 'DrBubb' date='Nov 24 2010, 08:49 AM' post='193862'] SIGNS OF WEAKNESS More signs that Property Bullishness is fading - though we don't see it in rents yet Spent half an hour in converstion with my letting agent freind today just to find out the latest information about asking rental prices.He said that the rents are factually down on 18 months ago and are certainly NOT GOING UP.So forget the vested interest noise and spin and as for sealed bids "HE LAUGHED SO MUCH HE SAID HE MIGHT PAY HIS TV LICENCE." Link to comment Share on other sites More sharing options...
bitbigt Posted November 25, 2010 Report Share Posted November 25, 2010 I've decide to ban myself for 24hrs, or to put it another way, to go on sympathy strike for Pixel8r. Anyone want to join me? Link to comment Share on other sites More sharing options...
Mabon Posted November 25, 2010 Report Share Posted November 25, 2010 Spent half an hour in converstion with my letting agent freind today just to find out the latest information about asking rental prices.He said that the rents are factually down on 18 months ago and are certainly NOT GOING UP.So forget the vested interest noise and spin and as for sealed bids "HE LAUGHED SO MUCH HE SAID HE MIGHT PAY HIS TV LICENCE." Anecdotal. The one bed flat upstairs from me, was up for rent for 8 weeks. The Agents were shuttling as many folks in as poss. Busy viewings for the first 3 weeks. However only approx 2 viewings a week for the next 3 and then 1 for the last 2. They were endeavouring to get around 190 per week. Eventually they rented it to a fella who I've had a few chats with. Told me he rented it for 145 per week. And only offered 4 weeks deposit as opposed to paying 6 weeks deposit they wanted. Meanwhile there is a lot of empty property near me in sunny Harrow. Next street over has three houses/ flats for sale. Two are empty. Same for the bottom end of my street. Three empty flats up for rent. Loads of the same property week in week out in the local rag too. Link to comment Share on other sites More sharing options...
drbubb Posted November 26, 2010 Author Report Share Posted November 26, 2010 I've decide to ban myself for 24hrs, or to put it another way, to go on sympathy strike for Pixel8r. Anyone want to join me? Go ahead. This site will only benefit if those who would otherwise go Off topic, as you have done in your 5:52 AM posting simply go quiet instead. Link to comment Share on other sites More sharing options...
drbubb Posted November 26, 2010 Author Report Share Posted November 26, 2010 They were endeavouring to get around 190 per week. Eventually they rented it to a fella who I've had a few chats with. Told me he rented it for 145 per week. And only offered 4 weeks deposit as opposed to paying 6 weeks deposit they wanted. Interesting. What is more in line with the market: 145 or 190? It looks like the LL should have been asking 170 or 175, he might have done better. Maybe the Agents will talk their clients into being less greedy, if the market tone is changing. Link to comment Share on other sites More sharing options...
bitbigt Posted November 26, 2010 Report Share Posted November 26, 2010 Go ahead. This site will only benefit if those who would otherwise go Off topic, as you have done in your 5:52 AM posting simply go quiet instead. Excuse me unbanning myself: but I apologise for my error in posting on (and disrupting) the wrong thread. I intended to post on the "Gold's corrections - How big? How long?" thread, and would be pleased for the 5.52am posting to be moved there and this current post deleted. Now I guess I'll shut up for another 24hrs, as punishment for my own stupidity :-) Link to comment Share on other sites More sharing options...
makindye Posted November 26, 2010 Report Share Posted November 26, 2010 I've been renting a modest flat for over 2 years in an attractive commuter town just outside London, but never switched off the rightmove etc alerts about comparable and slightly more expensive properties. Whilst at the moment rental asking prices are getting a bit elevated, I'm not convinced that they're clearing at comparable rates. IMHO any rises in asking prices are being driven by 4 factors: - seasonality - there are definite ebbs and flows throughout the course of the year, and I seem to remember that this time last year asking prices being higher before falling back in the new year - lettings agents being squeezed by competition, overheads and wage pressures (with little opportunities for productivity improvements) - the wise escaping the 'badlands' of London. These look likely to expand/deteriorate in the current climate and likely future (a major factor in my choice of location). - the continued infusion of expat & City bonus money spiking out the middle to top-end of both the rental and sale markets, playing havoc with averages (both mean and median) and the expectations of market 'professionals' My landlord hasn't dared raise the rent - they had a multi-month void before me and they know when they're on to a good thing... Link to comment Share on other sites More sharing options...
drbubb Posted November 26, 2010 Author Report Share Posted November 26, 2010 Excuse me unbanning myself: but I apologise for my error in posting on (and disrupting) the wrong thread. I intended to post on the "Gold's corrections - How big? How long?" thread, and would be pleased for the 5.52am posting to be moved there and this current post deleted. Now I guess I'll shut up for another 24hrs, as punishment for my own stupidity :-) It is self imposed, so you can lift it when you want Link to comment Share on other sites More sharing options...
Agent Woo Posted November 26, 2010 Report Share Posted November 26, 2010 Is it not innevitable, that at some time in UK interest rates must rise?? Doesn't it follow that demand for property would therefore be quenched within this enviroment? Would this not somewhat end any bullish arguements currently "doing the rounds"? Link to comment Share on other sites More sharing options...
numper Posted November 26, 2010 Report Share Posted November 26, 2010 Pray tell me, why do interest rates have to rise? I thought "The Chinese" controlled everything And can do whatever we want eheehehehe Link to comment Share on other sites More sharing options...
John Doe Posted November 26, 2010 Report Share Posted November 26, 2010 Is it not innevitable, that at some time in UK interest rates must rise?? Doesn't it follow that demand for property would therefore be quenched within this enviroment? Would this not somewhat end any bullish arguements currently "doing the rounds"? Agree 100%, well they can't get any lower, can they? Rising rates, when they come (and it could be a couple of years yet), will send the market down again. That said, it is, although unlikely, conceivable, however, that due to the unprecedented circumstances we find ourselves in, that a future QE round could actually start to write off existing debt. I know it’s unlikely, but I wouldn’t bet my life savings against it. The pass the parcel debt burden game currently being played cannot go on forever. Some day the game will end. Weather that results in debt write offs, or inflationary erosion of debt is still to be decided. The alternative is total meltdown. While that would teach the greedy a valuable lesson, it would hurt the innocent majority more.... be careful what you wish for. Link to comment Share on other sites More sharing options...
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