I’m a Pundit

The BBC today reported on how rent has risen by aroun 10-11% while house prices are expected to drop by 20%.  When they interview landlords on this they give reasons such as increased market (People selling houses and renting for a while)

Of course they avoid the major issue on this.

The Reason Rent is rising so dramatically in some areas is because Buy to Let investors are in serious trouble.  Many of them have found rent not covering rather significant mortgage increases, and with few other places to turn they are placing the burden on their tenants.

The Reason Property owners are admitting this to the press is that it would be an admission of their own guilt

By admitting they are raising rents to keep up with mortgage prices they are admitting it is their fault, they stretched themselves too thinly over debt and failed to keep enough money in reserve to cover high interest periods.  For that reason when times get tougher they have no choice but to massively increase rent, despite the fact it carries a significant risk of putting them out of business.

Despite the facct that there are a huge amount of unlet properties currently on the market as people return to house and flat sharing the Landlords will continue to spout their bullshit to remove any possible blame to themselves, in the end however a lot of them will go bankrupt as the market normalizes

written by Oli \\ tags: Depression, Housing, Lettin, Renting

The credit crunch has been a major part of the UK press recently. Due to the recent rise in interest rates the newspapers have suddenly took on a doom and gloom look on the UK Housing and Consumer Market.

Now first of this was predicted several years ago by many of us,  with many peoples earnings not being enough to buy.  But te real fact of the matter is that when people are having to borrow 8 x their earnings to buy a house a 0.5% interest increase is not going to make a huge amount of difference, it is the multiplier, not the interest rate, that is preventing first time buyers from investing at the moment.

On the BBC website today I saw the following quote,

“But 2009 is particularly difficult to predict at the moment as the credit crunch may last for two to three years.

“But this in turn may lead the Bank of England to cut interest rates sharply, which may help stimulate the market, especially as there is now pent up demand from would-be first time buyers.”

Now to me this looks like yet another pile of bullshite from the big boys. Now that the Public has become aware of the fact that people are having trouble affording houses, and there is no longer a ‘boom’ to cash in on there is little posibility of these companies promoting housing as a growing market.  Personally I believe we will be looking at a minimum of a 20-30% drop in housing prices (Enough to get to the 5x earnings barrier at least) before things start to settle, though this may take 3-4 years.

I particularly like the part where this representative states that  “there is now pent up demand from would-be first time buyers.” Of course there is a pent up demand for first time buyers.  The problem is that first time buyers are looking at around 8 to 10 x their annual income before tax to afford their first house.  It was not even fourty years ago that a single person could go out, get a basic job on just over minimum wage and still get a house at no more than 3x yearly earnings.  The social idea that you need to have a partner to buy a house is now quite ironicaly becoming reality after it was the topic of so many jokes in the mid 90’s.

As someone waiting to get in on the housing market and with very little debt I am personally dead on eager for this housing crash, recession and equalisation that has been making the rich richer and the poor poorer.

written by Oli \\ tags: Debt, England, Housing, Recession