New Fear: Now Rents Are Tanking

Remember the line from the other day about how housing prices were going to stabilise because the costs of mortgages compared to rents were finally approaching historical norms. Well, the other shoe just dropped in the UK, with rents tanking.

From the BBC:

Average rental asking prices dropped by 4.8% over the year to £830 a month in February, according to Findaproperty.com.

It found that the average home was up for grabs for 70 days before tenants were found, 15 days longer than a year ago.

“Tenants are becoming more demanding as the market swings in their favour and landlords are now less likely to receive the uplift in rents at renewal that they might previously have achieved,” said Mr Smith.

“Despite falling rents and increased competition, we do not expect investors to abandon the market.”

This is important because the ratio of price to rent is a key indicator for the housing markets. When prices get too far ahead of rents, its usually a sign that prices will drop. During the latest downturn in housing, the price to rent ratio was finally returning to sensible levels. But if rents start dropping, it could indicate that prices still have a long way to fall.

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