PropertyInvesting.net: property investment news: Britain's rental property market is counter-intuitively warped

Britain's rental property market is counter-intuitively warped

inception2

Inception/Warner Bros.

Rents in Britain are counter-intuitively cratering despite a severe housing shortage.

When there is too little supply to sate demand, property prices rise. And in turn, housing becomes increasingly less affordable. That leads to more and more people turning to the rental sector because they cannot afford to buy a home. That should push up rents as more people fight for the same rental properties.

Technically, rental prices should be going up alongside purchase prices.

However, according to a huge new chartbook by HSBC on Britain's housing market, rental prices are falling dramatically, turning market fundamentals in on their head.

View As: One Page Slides

Property prices have continually risen for over a decade, bar the two-year drop due to the credit crisis of 2007/2008.

HSBC

This is because Britain's housing market has a severe lack of supply — there aren't enough houses on the market to meet demand from buyers.

HSBC

This means properties are becoming more and more unaffordable because people are not earning enough money to keep up with rising house prices. In turn, people who cannot afford to buy a house, rely on the rental market.

HSBC

This should mean more pressure on the rental market and therefore rising rents. But look at this chart — rental growth is actually slowing dramatically.

HSBC

The HSBC note does not make it clear why this has happened. But it does say that since price growth is slowing, this could put off potential buy-to-let investors from entering or expanding their portfolios.

HSBC

Since 2009, the Bank of England has kept interest rates at record lows of 0.5% and only recently cut them again to 0.25%, which helped the buy-to-let market recover. However, as the chart below shows, the market is a far cry from the years preceding the credit crisis.

HSBC

Many buy-to-let investors are not mopping up property supply as steadily as before either. In April, a new surcharge for buy-to-let investors meant demand for these types of mortgages crashed.

HSBC

But whatever the reason for slowing rental growth, it may at least give some respite to renters, especially those in London who face exceptional high rents.

uk.businessinsider.com/

PropertyInvesting.net: Property Investment News

Analysis

Tax

Property Purchase

Planning

Letting

Property News

Britain's rental property market is counter-intuitively warped

View As: One Page Slides

Property prices have continually risen for over a decade, bar the two-year drop due to the credit crisis of 2007/2008.

This is because Britain's housing market has a severe lack of supply — there aren't enough houses on the market to meet demand from buyers.

This means properties are becoming more and more unaffordable because people are not earning enough money to keep up with rising house prices. In turn, people who cannot afford to buy a house, rely on the rental market.

This should mean more pressure on the rental market and therefore rising rents. But look at this chart — rental growth is actually slowing dramatically.

The HSBC note does not make it clear why this has happened. But it does say that since price growth is slowing, this could put off potential buy-to-let investors from entering or expanding their portfolios.

Since 2009, the Bank of England has kept interest rates at record lows of 0.5% and only recently cut them again to 0.25%, which helped the buy-to-let market recover. However, as the chart below shows, the market is a far cry from the years preceding the credit crisis.

Many buy-to-let investors are not mopping up property supply as steadily as before either. In April, a new surcharge for buy-to-let investors meant demand for these types of mortgages crashed.

But whatever the reason for slowing rental growth, it may at least give some respite to renters, especially those in London who face exceptional high rents.

PropertyInvesting.net: Property Investment News

Analysis

Tax

Property Purchase

Planning

Letting

Property News

Britain's rental property market is counter-intuitively warped

View As: One Page Slides

Property prices have continually risen for over a decade, bar the two-year drop due to the credit crisis of 2007/2008.

This is because Britain's housing market has a severe lack of supply — there aren't enough houses on the market to meet demand from buyers.

This means properties are becoming more and more unaffordable because people are not earning enough money to keep up with rising house prices. In turn, people who cannot afford to buy a house, rely on the rental market.

This should mean more pressure on the rental market and therefore rising rents. But look at this chart — rental growth is actually slowing dramatically​.

The HSBC note does not make it clear why this has happened. But it does say that since price growth is slowing, this could put off potential buy-to-let investors from entering or expanding their portfolios.

Since 2009, the Bank of England has kept interest rates at record lows of 0.5% and only recently cut them again to 0.25%, which helped the buy-to-let market recover. However, as the chart below shows, the market is a far cry from the years preceding the credit crisis.

Many buy-to-let investors are not mopping up property supply as steadily as before either. In April, a new surcharge for buy-to-let investors meant demand for these types of mortgages crashed.

But whatever the reason for slowing rental growth, it may at least give some respite to renters, especially those in London who face exceptional high rents.

This should mean more pressure on the rental market and therefore rising rents. But look at this chart — rental growth is actually slowing dramatically.