Sunday, 20 July 2008

Horrible, horrible, horrible

Where did all this nastiness come from? Moribund credit, excessive personal debt, and a commercial property crash; isn't there any good news out there? Well, some people believe that rents are increasing at double digit rates.

UK economy heads for ‘horror movie’

"Britain is facing an “economic horror movie” because of a “toxic mixture” of a moribund credit market and volatile oil prices." The Ernst & Young forecasting group predicts 1.5 percent growth this year, slowing to 1 percent in 2009; while consumer spending will slow to a standstill. The UK will be lucky to attain these anemic growth rates.

Given a Shovel, Digging Deeper Into Debt

A New York Times video shows how a Pennsylvania woman accumulated almost $300,000 of debt. The collection agencies call at least 20 times a day.

City regulator in mortgage fraud crackdown

The FSA are about to crackdown on mortgage fraud. Why bother? UK mortgage approvals are crashing towards zero. It is another reason why the FSA must be abolished.

Demand for office space crumbles

The housing market isn't the only crash; commercial property prices have fallen much further and faster.

Brown mocked over fiscal rules reform

The Treasury always intended to revise the rules, really, they did.

More insanity from the times property pages

It is becoming a nasty habit; but I can't help myself reading the Times property pages. In this article, the Times tackles the question of rents. Rental inflation has replaced house price appreciation as the saviour for the buy-to-let brigade.

"Given rising demand in a context of less supply, rents in many areas are likely to rise quite significantly in the short run, unless the UK economy plunges into a sharp recession. Although it is difficult to predict short-term changes in housing rents, increases of 10%-15% in both 2008 and 2009 may well occur, outside a relatively limited number of areas with a significant glut of properties."

We are half way through 2008, and the governments rental inflation index is running at about 3.5 percent. In order to get a 10-15 percent rental inflation number by the end this year, rents would have to explode. This is a matter of simple arithmetic.

In principle, 10-15 percent rental inflation is possible in 2009, but only if the Bank of England really began to push up monetary growth. Currently, the money supply is growing at 11.5 percent. Even a pessimist like me thinks that we have probably reached a peak growth rate for the money supply.

4 comments:

Anonymous said...

That old rental growth myth seems very popular these days.

powerman said...

Rents go up in line with incomes. All this new money seems to be being invested in commodities by a wealthy few rather than filtering through the system and finding it's way into higher salaries.

Most of us are just going to get poorer.

sobers said...

I exploded at the radio yesterday when I heard Darling blithering on about the "Downturn was proving to be deeper than we expected". I'm sorry but he's a lying c***! Everyone knew ages ago what was going to happen, and certainly by the Budget in March. Just goes to prove the old adage - You can tell when a politician's lying - his lips move!

RenterGirl said...

I think it's important to note the difference between regions. Outside of London, or those pockets of high demand/low supply like Brighton, rents are homogenising. In areas where newbuild buy-to-let was rampant, rents for one/two bed flats are stagnant at best, but usually falling. Even the letting Agents are reflecting this in prices in their windows.

Alice - how far can people be pushed. If costs of food, rent, fuel and evetyhing rises, what happens? Revolution? Or does out national 'mustn't grumble' mentality kick in?