Extortionate rents

[Romnarz]

If lots offers above asking price have been made that shows that people are prepared to pay that daft price !If I was selling I'd ask for even more. It's just supply and demand.The market is also being distorted by the'buy to let brigade'they are buying propery because pension rates are so poor and returns on saving are almost none existent after tax.

[Jeremy]

charlie_elise Wrote:

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> We moved here to pay less rent and have more room

> compared to a flat in Limehouse. What I can't work

> out is how the rent is cheaper but the house up

> the road is going for 30% more than the place we

> moved out of went for (we only moved because it

> was sold by the landlord).

Limehouse much more popular amongst renters... young people with grad jobs in Canary Wharf or City. Easier access to central London, trendy East End, etc. ED is more popular with slightly older people who possibly have families and are ready to settle down and buy a place.

Rent is driven by market forces more than purchase price.

[DaveR]

"Perhaps, as some posters suggest, we should move to somewhere cheaper. Honestly,I'm not sure where that is or where we could move such that our rent doesn't swallow the vast majority or our income. Way beyond London and out of reach of the work I now do."

Obviously I don't know your particular circumstances, but almost anywhere with an SE postcode is now cheaper than SE22, and you don't have to go far (Forest Hill, Sydenham) to see that. Don't get me wrong, I have a lot of sympathy with people who have put down roots in a particular area and then find that they can't afford to stay. But it is worth busting two myths that still get a lot of currency here:

(i) SE22 is an ordinary place that is or should be cheap to live in

(ii) everywhere is London is as or more expensive than SE22

Also, IMHO, blaming landlords and/or the government is pointless and wrong. If the returns on residential rentals are good then people will invest, and if it's not small landlords it will be big corporate landlords. And everybody says 'build more houses' but they mean 'build more houses somewhere else' - governments know this.

[LondonMix]

Couldn't agree more.

DaveR Wrote:

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> "Perhaps, as some posters suggest, we should move

> to somewhere cheaper. Honestly,I'm not sure where

> that is or where we could move such that our rent

> doesn't swallow the vast majority or our income.

> Way beyond London and out of reach of the work I

> now do."

>

> Obviously I don't know your particular

> circumstances, but almost anywhere with an SE

> postcode is now cheaper than SE22, and you don't

> have to go far (Forest Hill, Sydenham) to see

> that. Don't get me wrong, I have a lot of

> sympathy with people who have put down roots in a

> particular area and then find that they can't

> afford to stay. But it is worth busting two myths

> that still get a lot of currency here:

>

> (i) SE22 is an ordinary place that is or should be

> cheap to live in

>

> (ii) everywhere is London is as or more expensive

> than SE22

>

> Also, IMHO, blaming landlords and/or the

> government is pointless and wrong. If the returns

> on residential rentals are good then people will

> invest, and if it's not small landlords it will be

> big corporate landlords. And everybody says

> 'build more houses' but they mean 'build more

> houses somewhere else' - governments know this.

[Loz]

When considering rents, you have to look at the rate of return on the investment, i.e. the property value. Generally, a landlord would be looking at a fair return of about 6%. Remember, this is not 'profit', as costs such as repairs, insurance, voids, mortgage, etc have to come out of it.

So, if you are renting a property worth ?500k, then a 'fair' rent would be about ?2500 pcm.

[StraferJack]

The profit comes when the tenants have payed the mortage for the landlord that he/she couldn't do themselves surely?

Thiss 500k property - is that the worth now or when landlord took the mortgage?

If the mortgage was taken when the propert was worth 150k, is 2500 still "fair"?

[alice]

youd have to go back to the mid 90s to pay 150,000 for a house now worth 500,00.

so are you saying the rents should be kept the same while everything else was going up ..wages and prices too

that doesnt make sense

[muffins78]

I was trying to figure out a little while ago would it better for me to rent out my own place. I was thinking about moving away from London. All in all, to break even only, the rent would still appear high. I actually think that some landlords aren't making anything much at all, unless it is a complete business for them and/or they bought their property ages ago!

[LondonMix]

I don't rent out but agree that anyone buying today doesn't make much- break even after tax given yields are often below 6%.

The idea that rents should be based on the price the landlord bought the house for doesn't make sesne. And if the house loses value / market rents go down should tenants be forced to pay higher than market rents so the landlord doesn't lose money?

Its a business. There should be laws dictating how landlords can treat tenants so they aren't exploited but the only fair rent is a rent that the landlord is willing to accept and the tenant is willing to pay.

Super prime rents in London this year have actually fallen 2.7%.

http://www.propertywire.com/news/europe/london-prime-rental-index-201308278162.html

[StraferJack]

"so are you saying the rents should be kept the same while everything else was going up ..wages and prices too "

I didn't say that - link it to inflation/some measure by all means. BUt to keep upping it by the value of the house? How is a tenant meant to keep up with that?

I can well believe that a landlord buying a place with a view to letting it isn't going to see much in the way of profit for the forseeable. But, linked to the above, teh value of the property wil lbe rising over the long term. So even if the landlord doesn't make dime one over the whole period of letting it, they still end up eventually with a mortageg free propert worth $$$$$$$$$$$$

[StraferJack]

"Its a business. "

no, no it isn't

[LondonMix]

Yes, yes it is. You might not want it to be and there are alternatives to this model-- ie all housing could be owned by the government and if there was excess demand, you could join a list. But the current model is a business for better or worse. People can and do lose money and there are real investment and business risk attached. That's not to say there might not be a better way to do it though!

[StraferJack]

or more specifically, it shouldn't be

[Jeremy]

As SJ says, landlords can start raking it in if they pay off their loans, or if the property market rockets. Often they've done so with a relatively small initial outlay, compared to if they wanted a similar amount of ?? exposure in the stock market for instance.

But what can you do? Most landlords do not fall into that category (no evidence, just what I think). Many are renting out their place for lifestyle reasons, or for a small nest-egg (which they will at some point pay capital gains tax on). It's not all about landlords taking 100% profit and laughing all the way to the bank.

[Jeremy]

StraferJack Wrote:

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> BUt to keep upping it by the

> value of the house? How is a tenant meant to keep

> up with that?

Surely rent is driven by supply/demand, not by landlords deciding they need a certain percentage of the property value every month?

[Loz]

StraferJack Wrote:

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> or more specifically, it shouldn't be

Why not? Or, where does it end? Should building houses be a business? Should growing food be a business?

[alice]

why shouldnt renting properties be a business?

you might as well say you cant make a profit out of selling food

[StraferJack]

You don't have to go to extremes (government owning all property?) to find a more stable middle ground

Not sure if it's as true as it used to be but there appears to be a particularly avaricious property market in this country compared to many others - the mindset is what needs to change.

have you (not you Londonmix -a rhetorical "you) got a house? well done, now chill, don't buy anymore and let other people find their own way. This idea that you need to invest in property doesn't need to trouble you. Buy to Let schemese - are they as aggressively markets and used in other countries? They are distorting the market

The idea that if I owned a second property and after 5 years found it was worth twice what it was, I would ask my tenants for double the rent? ick...

[Loz]

Jeremy Wrote:

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> StraferJack Wrote:

> --------------------------------------------------

> -----

> > BUt to keep upping it by the

> > value of the house? How is a tenant meant to keep

> > up with that?

>

> Surely rent is driven by supply/demand, not by

> landlords deciding they need a certain percentage

> of the property value every month?

You are right, it is. But that is the generally accepted acceptable rate of return. If the return is less than that, landlord would move their investment out of the market and there would be a shortage. Much greater than that and either more would pile in, increasing supply, or buying would be a much better option.

[StraferJack]

"Surely rent is driven by supply/demand, not by landlords deciding they need a certain percentage of the property value every month?"

With sitting tenants? rent is driven by supply and demand? So becuse you CAN charge more, wether they can afford it or not is moot?

If the landlord isn't an investor but is doing it for lifestyle reasons/nest egg then why would they be interested in chucking someone out for more dosh?

[Loz]

StraferJack Wrote:

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> The idea that if I owned a second property and after 5 years found it was worth twice what it

> was, I would ask my tenants for double the rent?

> ick...

As Jeremy pointed out, the market dictates the rent. And if you aren't charging somewhere in the region of the market, then you aren't being sensible.

And, if your yield was only 1% or 2%, you'd probably ask yourself if there was a better place to invest your money.

[StraferJack]

"As Jeremy pointed out, the market dictates the rent"

No it doesn't. the market informs you what rent you could get. It doesn't dictate anything

[Jeremy]

I'm broadly sympathetic to what you're saying SJ, but it boils down to a much more fundamental question of whether housing (specifically rental in this case) should be subject to market forces. And if it shouldn't, how could it be implemented? Should all property rental be a government function?

Appealling to people's better nature to charge a fair price... you know as well as I do that it's a non-starter.

[Loz]

Well, not if you let your politics get in the way of running a business, no.

I'll change that to 'the market dictates the maximum rent you can charge'. You could charge much less than that, but why would you? Now, there is value in a good quality, long term tenant, but the landlord needs to decide what that value is. Yes, they could charge ?100 a month more, but a good tenant might move out, a less responsible tenant move in and they might end up with a long void period. So, is that worth it? To me, probably not. But ?200? ?300? Quantifying that value is difficult.

[StraferJack]

"Appealling to people's better nature to charge a fair price."

well for a start there ARE good and decent landlords out there who don't charge market rates. Not enough IMO but they do exist

market forces aren't a binary use/ignore option either. By all means use the market but as with all manner of market activity you can have boundaries and regulations. The whole buy-to-let market could be discouraged for a start.

You could cap rents at a % above your mortage payments

rent controls existed in this country before and in many others - it's not science fiction to suggest them

"but why would you want them?"

To take the heat out of both buying/renting markets. To allow more people to spend less of their monthly income on them. To reduce the government/council overhead on paying dodgy landlords.