Tuesday, 6 May 2008

RENTS ARE RISING!!! (or are they...)

In this emerging housing crisis, one sector of the property world remains upbeat, even cocky. Surprise, surprise, it’s the letting agents, who claim that – yes, purchase prices are falling, but rents are up, up and away, soaring off into the stratosphere.


Before moving to Dovecot Towers, I noticed how agents would delicately, coyly, mention a price, but on catching quizzically raised eyebrows indicating:
‘HOW MUCH!!?? Oh, do behave; how much is it really?’ they would backtrack.

Estate agents are chancers, seeing how much they can prise out of naïve, desperate, daft-as-a-brush tenants. It didn’t work. We’re not that gullible, and it’s a renters market now.

Here’s what’s really going on. In affluent, desirable areas like Edinburgh, Brighton, and Notting Hill, where large, well-constructed, traditional homes are rare and space is at a premium, demand is permanently high and rents are constantly edging upwards. But elsewhere across the country, prices are homogenising. Locally, rents on previously less expensive un-improved flats and slighter downmarket ex-council houses are also rising, albeit slowly. They are converging with newbuild rents, which have lifted, but subsequently capped levels wherever they are built.

But where inner city brownfield sites have been carpeted with those newbuild shoeboxes, bought as buy to let investments, demand is dead. Prices there were initially higher than the rest of the locale, but are now static or falling slightly. There are too many little boxes, and they all look just the same.

Rents are still too high though. Newbuilds raised local levels: interest rates were escalating, and inexperienced owners had unreasonable expectations of profit, but agents persist in setting rents at stupidly high amounts. I’ve been checking, however: visiting agents, asking about bargains, wondering if anyone has a newbuild with a buy to let owner who can’t sell, and might therefore be willing to accept a more reasonable rent. All of them said yes.

Agents have rightly surmised that selling property will not maintain their profits. Publicly, they talk up rental rates, hoping theirs is a self-fulfilling falsehood. They are scrambling to let flats they cannot sell, when major developers have stopped construction, so flooded is the market with poky little hutches. As things stand, developers can’t offload what they’ve already built.

Apart from anything else, owners have realised that letting agents are parasites (so many landlords say this) raking in an undeserved percentage for little action. Many owners now let privately online, so asking agents about prices is misleading as they don’t necessarily have the relevant numbers to hand, and anyway have a vested interest in telling porkies.

One landlord advertised his flat with an ad on the main door of Dovecot Towers. The rent was risibly inflated, and rude words were quickly added to his sign. By noon, the money requested had fallen. By night time, the price had sunk to a reasonable level, and included parking. He’d got real. There was no alternative.

So, if you meet a letting agent crowing about rising rents, take a small step back and sniff the air. What’s that nasty smell? Why, that’ll be the whiff of soiled pants on fire.


Alice Cook said...

Whatever estate agents might say, there an iron rule operating here; rents are linked to average earnings. In the last ten years, rental inflation (measured by the OMS) exceeded average earnings growth in just three months out of 120.

Good post.


Happy-council-tenant said...

Too right. I keep seeing claims by buy-to-let landlords that rents have gone up 12% in the last six months blah blah... It's pretty obvious that rents are limited by earnings, which are not increasing much at all. Then again, most BTL landlords have never dealt in reality.

limesmoothie said...

I live in Edinburgh and rents have not risen in real terms in over ten years.

My rent on 1 bed flat 1998 - £450
My rent on very large 1 bed flat same area 2008 -£500

So fifty quid, ten years..... £5 per annum.

We have a massive oversupply of newbuild flats which stand empty, much like other places in the UK.

Don't believe the hype (in the Scotsman/Edinburgh Evening News).

Great blog.

The reaper said...

intersting site,have to agree on rents goign down on last year up here in the east mids.in fact atht emid to high end they're down 20% +

btw,'only me's' posted a link on HPC.there's some nice compliments for you

RenterGirl said...

It's funny isn't; if you newspapers, braidcasters etc were to print, everyday, that bananas were now routinely purple, the world would believe them. Thansk everyone for reading, and taking the time to reply. And for saying such nice things!

davidof said...

As another data-point. In the s/e where I rent property I would say rents have gone up about 20-25% over the last 8-10 or so years if you want to avoid those nasty voids. That is probably similar to real wage inflation.

RenterGirl said...

London, and even Brighton are different; high demand, low availability, so prices there will rocket. Even so, it's about recording what rents are obtained, not requested by agents.