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Amount spent by private renters is approaching parity with mortgage payments

independent.co.uk

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Re: Amount spent by private renters is approaching parity with mortgage payments

#21

Post by maxerickson »

brightball wrote: post #16
alex_duf wrote: post #7

Earlier quoted context omitted.

> In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. That's assuming you finance your property with debt and let someone else pay for your debt. If you either happen to own a property you don't use, or own the property you live in, it makes perfect sense. You're describing everything that's wrong about the property…

I’m not sure that’s anything other than math. If I have a property and I decide to rent it, why would I rent it for anything less than the sum of my expenses plus a profit margin that will cover maintenance or repairs? Why would anyone else? A rental property is just like any other business.

To reduce your losses.

Consider a landlord that stupidly overpays for a property. The market isn't going to cry about the landlord not being able to charge rent that covers their expenses.

Re: Amount spent by private renters is approaching parity with mortgage payments

#22

Post by alex_duf »

brightball wrote: post #16
alex_duf wrote: post #7

Earlier quoted context omitted.

> In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. That's assuming you finance your property with debt and let someone else pay for your debt. If you either happen to own a property you don't use, or own the property you live in, it makes perfect sense. You're describing everything that's wrong about the property…

I’m not sure that’s anything other than math. If I have a property and I decide to rent it, why would I rent it for anything less than the sum of my expenses plus a profit margin that will cover maintenance or repairs? Why would anyone else? A rental property is just like any other business.

That's absolutely correct, my point was that once you've done the math - and assuming you are still paying a mortgage - it should give you a rent high enough such that no-one would agree to take it, unless you are willing to keep paying for part of it. It would therefore push the owner to either sell or stay in their property.

That's my blue-sky-point-of-view of the property market which doesn't reflect the reality, but I believe with enough people treating property as an investment rather than a personal need you end up in our current situation.

My personal view is that tax systems should compensate by being more expensive to own more properties than you need. (where to put a limit, I'm not sure)

Re: Amount spent by private renters is approaching parity with mortgage payments

#23

Post by turblety »

J-dawg wrote: post #17
abtinf wrote: post #2

In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. This article drops critical context. 10 years ago, one of the earliest and most potent warning signs of the coming collapse was the extreme disparity between rents and mortgages. Home prices skyrocketed while rents remained relatively flat. And just a couple years b…

The article isn't talking about disparity between rents and mortgages. It's saying the total amount being paid in rent is approaching the total amount paid in mortgage payments. I'm not sure what that proves other than far more people are renting than previously. This needn't even be a problem, inherently. It's just that renting is often a miserable experience in the UK, and people are having to spend far too much of…

> people are having to spend far too much of their income on it [rent], which is setting us up for all sorts of societal problems in the future.

I wonder what the long term effects of this will be. When no one has any savings and no house when they retire, and all of a sudden have to live on a very small pension (which if the trends [1] are anything to go by may all collapse) what are people going to do?

[1] https://www.forbes.com/consent/?toURL=https://www.forbes.com...

Re: Amount spent by private renters is approaching parity with mortgage payments

#24

Post by systemtest »

cdolan wrote: post #12
turblety wrote: post #9

Earlier quoted context omitted.

But the deposit is a massive issue. If you put that deposit into stocks and shares (a diversified portfolio) you could (will probably) find that outperform the cost of your mortgage and maintenance together. If they could get rid of the deposit you might break even with a stocks and shares investment plan. https://www.thebalance.com/real-estate-vs-stocks-which-is-th...

Are you advocating for zero money down mortgages? That’s what causes market crashes.

In the Netherlands you used to be able to get a 105 percent mortgage, so you could finance the notary, transfer tax, mortgage advisor and so on. Nowadays it is at 100 percent and you have to pay for those services out of pocket.

Re: Amount spent by private renters is approaching parity with mortgage payments

#25

Post by raverbashing »

roel_v wrote: post #20
raverbashing wrote: post #18

Earlier quoted context omitted.

> why would I rent it for anything less than the sum of my expenses plus a profit margin that will cover maintenance or repairs? > Why would anyone else? A rental property is just like any other business. You're absolutely right if your financial and strategical planning only sees up to the next quarter.

Let's say I look 10 years into the future. How does that change anything?

How much can real estate appreciate in 10 years again? (though it can definitely depreciate, but depends on its current situation).

Also its future value may depend on how you're renting it currently. (Or even if your overcharging for rent and the property is empty because you are waiting for "the perfect tenant")

You're also assuming buying and selling property is frictionless.

If your equity is negative it might be better (or even be the only alternative) to rent it at a below mortgage cost to have fewer losses.

Re: Amount spent by private renters is approaching parity with mortgage payments

#26

Post by hobofan »

woodpanel wrote: post #5
abtinf wrote: post #2

In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. This article drops critical context. 10 years ago, one of the earliest and most potent warning signs of the coming collapse was the extreme disparity between rents and mortgages. Home prices skyrocketed while rents remained relatively flat. And just a couple years b…

Interesting! Germany seems to be in the situation you described as "10 years ago".

> while rents remained relatively flat

Unless you live in a more rural area in Germany that statement doesn't apply.

Re: Amount spent by private renters is approaching parity with mortgage payments

#27

Post by J-dawg »

The UK has a problem with housing supply, which will take time to fix.

But what needs to happen urgently (and could happen virtually overnight if politicians wanted it to) is that renting needs to be made slightly less awful.

Renting a home is no longer something that people do for a few years while they're young. Many will be doing it for life, and the rules need to change accordingly.

Some ideas:

- A total ban on any agent's fees being charged to the tenant (already happened in Scotland, and been promised to the rest of the UK for months now).

- A year's notice before you can evict someone from a home. (unless they are not paying rent / trashing the place)

- A year's notice before increasing the rent.

- Some sort of government body that forces landlords to conduct repairs to a high standard, and obliges them to pay for alternative accommodation if the property isn't fixed.

Re: Amount spent by private renters is approaching parity with mortgage payments

#28

Post by vertex-four »

The problem is that people who are renting often don’t have the option of getting a mortgage in the U.K. People often rent much nicer flats than they could get a mortgage for - especially within cities. Alternatively, they’re renting flats that are non-mortgageable, and anything that the banks will provide a mortgage on is out of their affordability.

Basically - people who are renting are, in practice, stuck renting, and I suspect a lot of people can be pushed a lot harder than they are now - we’ve only seen the start of young adults continuing to live with their parents while working due to the cost of renting.

Re: Amount spent by private renters is approaching parity with mortgage payments

#29

Post by J-dawg »

turblety wrote: post #23
J-dawg wrote: post #17

Earlier quoted context omitted.

The article isn't talking about disparity between rents and mortgages. It's saying the total amount being paid in rent is approaching the total amount paid in mortgage payments. I'm not sure what that proves other than far more people are renting than previously. This needn't even be a problem, inherently. It's just that renting is often a miserable experience in the UK, and people are having to spend far too much of…

> people are having to spend far too much of their income on it [rent], which is setting us up for all sorts of societal problems in the future. I wonder what the long term effects of this will be. When no one has any savings and no house when they retire, and all of a sudden have to live on a very small pension (which if the trends [1] are anything to go by may all collapse) what are people going to do? [1] https://…

Exactly. I expect a lot of people will decide to move to a cheaper part of the EU where their meagre pension will go further. Hey wait a minute...

Re: Amount spent by private renters is approaching parity with mortgage payments

#30

Post by T-Winsnes »

abtinf wrote: post #2

In a free market, rent will always be higher than cost of a property. If it were less, the property is an unprofitable investment and should be divested. This article drops critical context. 10 years ago, one of the earliest and most potent warning signs of the coming collapse was the extreme disparity between rents and mortgages. Home prices skyrocketed while rents remained relatively flat. And just a couple years b…

That really depends on the Tax laws in the area you are looking at. Negative gains will help reduce the cost of the investment, and if you take capital gains fueled by the increase in population into account, it can be highly profitable. Even when rent doesn't cover the whole mortgage payment.
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