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Sorry to go on but rents are up yet again

20th May 2008 | back to article listings BACK    print this article PRINT

Now the BBC is reporting from the coalface :

news.bbc.co.uk/1/hi/business/7404947.stm

Rents at 50% rising for this person may not be typical in the short term but we reckon rents will be up as much as 50% within a few years time for the whole country. In the meantime this is creating massive pent-up demand for housing purchase. The estate agents we're talking to report substantial 'pent-up demand from first-time buyers' and this is just yet another factor that is going to be supporting house prices over coming months as the mortgage market improves.

On the downside we are seeing quite a bit of evidence that a number of Polish workers in particular are returning to Poland the strength of the zloty and this will suppress a little of the housing demand which seen in the last few years but compare to all the other immigrant demand we're seeing we don't expect this to be material.

One question that we are driven to ask based on recent events is whether or not valuers are manipulating the market-place with regard to rents, under instructions from some of the lenders (who own many of the valuers). This is a serious allegation but there is some compelling evidence. We are seeing a number of situations where local valuers appear to be under instructions from head office to down value property and also rents in particular in order to reduce the maximum loan permitted under the interest cover calculations. This appears to be a tactic to limit risk for lenders and the valuers appear to be under the thumb at present.

One example very recently were some excellent properties in Warrington centre next to the railway station that the valuer insisted would rent for no more than £500 a month - we knew better and the local letting agents knew better who were queueing up to take these properties from our clients and these started renting as soon as completions happened at £650 a month. We have a similar situation in central Liverpool at a scheme where letting agents are chasing us for a completion date on a scheme as they have waiting tenants to sign up on much better rents than on the valuation. This is potentially market manipulation if it was true and if so the valuers should be ashamed of themselves for corrupting their 'professional' expertise with such blatant manipulation, especially in such a time of huge rental demand and rent inflation. In the end of course it is benefiting the investors as well as derisking the lenders as developers have to agree a much lower price in the end in order to get the mortgages through on these artificially low rent assessments. The main loser appears to be the developer being forced to give huge price reductions.

The picture for property investors continues to be good with yields rising and great bargains to be had.

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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