Wednesday, 7 September 2016

Homeys going round the logic clock yet again.

From City AM:

Rents kept on an upwards climb in August, but the pace of rent growth is slowing. In August, prices grew by 3.1 per cent year-on-year, according to HomeLet's rental index. Tenants signing new agreements paid an average £913 a month.

But this increase compares with annual inflation of between 3.5 per cent and 3.8 per cent for the last four months, and this time last year, year-on-year growth was nearly six per cent. The slowdown was most apparent in London and the sought east, and it correlates with the stamp duty tax changes that came in at the beginning of April.

Why on earth they imagine that rents should increase smoothly and you can simply project from the past into the future is anybody's guess. Rental values are a function of how well or badly the economy is doing; you have to forecast the economy and work backwards from that.

It's the last bit that rankles. There's no reason to assume that taxes paid by landowners/landlords collectively have the slightest impact on rents, they will neither push them up nor down.

Nonetheless, it makes a refreshing change from the squealing of a few months ago:

Rents increased across most of the UK as a stamp duty hike for buy-to-let landlords came into force, an index has found. The average rent in the three months to the end of April was £764 for the UK, excluding London, up from £755, the month before...

Landlords are also facing a financial squeeze due to restrictions on their tax breaks. It has been suggested that in the longer-term, tenants may see the extra costs passed on to them through increases to their rent.


mombers said...

What cost increases are used to justify price increases here? Surely a competitive market will be cost plus a normal margin? If not, it can't be a competitive market. Unless some mental gymnastics can be done to invent costs that correlate with rents

Dinero said...

The most interesting quote was in the the next paragraph.

" . . . RENTS are continuing to rise at a SUSTAINABLE PACE . . . BELOW HOUSE PRICE INCREASES."

So he is saying house price rises increase rents.

The article continues with a possible explanation

"In the coming months, rents would be driven by the continuing growth in demand for rental properties as high house prices prevent many from getting on the housing ladder. "

which technically could be possible if the buyers are a distinct group, and so the house price is not the the capitalized figure of the house rent.

Mark Wadsworth said...

M, if you push them, the Homeys then say "Its not about our costs, it's about supply and demand in the free market"

D, good one, I didn't notice that.

Lola said...

Private tenancies are a bit 'sticky', IMHO. That is tenants make a 'home' and are reluctant to move, even if the rent goes up, a bit. Of course, at some point, they will say enough and move out. And I suppose that that sets the 'market rent'.

Bayard said...

"And I suppose that that sets the 'market rent'."

Well, not really, because now the landlord has to re-let the property and he won't be able to charge the new tenants the extra rent they paid him to avoid the hassle of moving. Also, unless you are letting to HB claimants, would-be Londoners or other desperate types, most potential tenants check up on their potential landlord and will soon find out if he's the money grubbing type that pulls that sort of dodge.