I broadly agree but the other parts of that cost model is the number of people looking to rent, amount of properties to rent, and the minimum cost of being able to offer them to rent.
If your costs go up, such as interest rate rises, increased legislation, or additional taxation then those on the margins have only two choices, put up prices or sell up. I saw it with the recent interest rate rises, properties sold at a discount with sitting tenants as the land lord could no longer afford the property.
What the rents are offered is dictated by what the majority for that property price point can afford. Increase rent beyond whats affordable and you will decrease the supply of renters.
Less renters, less properties getting rented, and if you are a marginal land lord then last thing you want is the property empty for any period of time so you have to sell, further reducing supply.
Once you start cutting out the bottom of the affordability end of that property type rents as an average can go up as the people left can afford to spend more on rent and there are less properties to rent reducing supply.
This is whats been happening with less and less young people even renting now, the bottom gets priced out.
Well obviously as an average, some land lords will need or want to absorb some of it, some wont. But as I mentioned, the heavily leveraged or greedy ones in high demand areas will more than likely pass on more, as that’s what happened with the interest rate rises.
I think if it goes up even 25% of the amount its still going to make a hell of a lot of renters unhappy at a time that the government should be avoiding that.
I broadly agree but the other parts of that cost model is the number of people looking to rent, amount of properties to rent, and the minimum cost of being able to offer them to rent.
If your costs go up, such as interest rate rises, increased legislation, or additional taxation then those on the margins have only two choices, put up prices or sell up. I saw it with the recent interest rate rises, properties sold at a discount with sitting tenants as the land lord could no longer afford the property.
What the rents are offered is dictated by what the majority for that property price point can afford. Increase rent beyond whats affordable and you will decrease the supply of renters.
Less renters, less properties getting rented, and if you are a marginal land lord then last thing you want is the property empty for any period of time so you have to sell, further reducing supply.
Once you start cutting out the bottom of the affordability end of that property type rents as an average can go up as the people left can afford to spend more on rent and there are less properties to rent reducing supply.
This is whats been happening with less and less young people even renting now, the bottom gets priced out.
It will push up rents, for sure, I just mean it won’t be a 1:1 increase (most likely).
Well obviously as an average, some land lords will need or want to absorb some of it, some wont. But as I mentioned, the heavily leveraged or greedy ones in high demand areas will more than likely pass on more, as that’s what happened with the interest rate rises.
I think if it goes up even 25% of the amount its still going to make a hell of a lot of renters unhappy at a time that the government should be avoiding that.