House Prices to fall, but rents to rise in 2024...?
According to a recent article in the BBC News house prices are set to fall, but rents are set to rise in 2024.
I found this intriguing because at first glance this seems to defy market logic...
If house prices are falling you would expect this to encourage more people to buy houses, which should lower demand for rentals, thus lowering the price of rentals too.
HOWEVER this is NOT the case here....
So what's occurring...?
How can house prices go down AND rents go up at the same time...?
I think TWO factors are at play which means the housing market operates slightly differently to other consumer markets, given that housing is so very expensive and SLOW to adapt....
Firstly there is a shortage of housing in the UK. There simply isn't enough housing to meet the demand. Renters have to compete with each other. Planning laws don't help this.
Secondly, the people who own houses to rent tend to be wealthy, and they can afford to sit on them for a period at break-even in anticipation of the market picking up in the future.
Is it inevitable that house prices will come down further...?
This seems logical... when it comes to First Time Buyers, those who rent have seen the cost of renting go up by around 30% over the last few years, meaning their capacity to save to buy has been drastically reduced.
This represents a good chunk of the demand side of the housing market, just ordinary 30 somethings who are priced out at current prices.
Meanwhile buying to rent is less attractive in the current climate.... it makes no sense to buy an asset today that is declining in value at the same rate that rents are increasing in value, especially when it feels unlikely that rents are going to go much higher, there simply isn't that much capacity in the market.
(There comes a price-point when living with your parents into your 30s seems like a MUCH better option!).
Conclusions...
I think the most likely situation is a gradual trend downwards for house prices, given that there simply isn't that much capacity for people to pay more towards rent and that buy-to-let is no longer an appealing investment option, meaning more housing should come online this year for people to buy to live.
I think the same happening here as they couldn't sell houses due to high interest rates.
So people just have to sit on them...!
The economy is not good anywhere in the world, here the rents are also crazy because of how high they are, they rent you a room for what a couple of years ago it cost to rent a whole apartment, they also ask for many months of deposit, most of them have to live with their parents until they are over 30!
It's grim for the young I think!
Unfortunately, we have the same situation in our country. Prices are ridiculous. Rents almost double every year.
Study the trans patten of house rent and buying of house. The trend are different, they are two different market reacting to different cause.
That doesn't sound sustainable.
If you understand the house market well you will notice the trend patten of house rent is different from house buying.
Demand on house rent is high uk compare to buying of house. The cause is high inflow of immigrant to UK. The immigrants don't have fund to buy house so the pressure of demand will be on rent.
The only thing that can correct that is to reduce immigrant or equal price of rent to price of buying house. The option looks crazy
Immigration sure doesn't help the rental market.
I would hope the next government improves things for people looking for somewhere to live. Young people will struggle to buy, so need decent options for renting. Housing is a basic need. There are people who own dozens of houses that they rent out and they ought to treat their tenants well. They will be raking it in anyway.
Something needs to change for sure, the young need some kind of break. more than abolishing inheritance tax which is just a boost for the around 30%.
Many buy to let landlords are feeling the pinch of increasing mortgage payments, so either rents go up to cover the shortfall, or they sell up and pay off the mortgage.
Comes a point where it is a better return to pay of expensive debt, and also remove the risk from exposure to potentially higher rates and to bank dwindling and uncertain profits
I have a friend in exactly that situation in London, his property has been up for sale for 6mts with barely a viewing , let alone an offer. So he has just dropped his asking price. There you have it, one less rental home available and one property for sale with a reduced asking price
It will happen! It's just time I think.
We have a huge housing problem, that recently peeked in Portugal, and more specifically in the Lisbon and Porto cities. Much of that due to the pressure of the digital nomads that started to choose those cities to live. Fortunately I bought my house in August 2010 (paying the monthly instalment on my bank loan), but very "under" the normal values for the area... I just asked for 70% of the flat value, and I picked a humble flat, since I was single then (and I continue to be... 😅) didn't want to give a larger step then what I could afford... But I know so many younger folks that I have to split house with 2 or 3 other persons to ensure that they can pay the rent... A true disaster...
Sounds like that's localised, but it's a thing for sure, the rich pushing the poor out!
Hmmm do you know that here in Nigeria Lagos state specifically people who inherited houses depend on the rent for a living as a result rent is extremely at the high side, and this is affecting cost of living and the cash inflow is low, but I think that's different from UK because the cash inflow there is high
Although with inflation, not so high!
It must be tough for young people needing to rent in the current market. You definetly need to think outside the box to dodge these rental and student loans traps.
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I know it's all about living with your parents or tiny homes I think!