Is at 10% year-on-year rent increase normal?

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Wednesday 19 September 2007 8.08pm
Hi -

I am a private tenant at the north end of SE1. I've been here several years and have recent year-on-year rent increases at lease renewal of 4%, 8% and now 10%.

While I live in a desirable area, I am wondering if these figures are keeping up with real market rates? They do seem a bit excessive. Any ideas?

Aside from negotiating a better rate with my landlord (or moving!), do I have any options to minimise these increases?

Thanks,
~ Risen
Thursday 20 September 2007 7.40am
Rents have generally been static or even going down in the past few years, due to the huge expansion in buy to let. (Look at all those new builds going up round here - they're not being bought up by people who want to live in them!)

In the last five years our rent has gone up once - by about 2% and that was only because we couldn't be bothered to challenge it. Previously they'd said they wanted to put the rent up and we just said that the market rate for rents going down so we didn't think ours should increase - and the landlord backed down.

Your l'lord is prob trying to pass on increases in his/her mortgage to you due to rising interest rates. But if you threaten to move out they could well back down as they face the possiblity of a long void period and then having to accept less than you're paying right now. You're in a strong position so fight it!!!
Thursday 20 September 2007 8.03am
Beowulf wrote:
Your l'lord is prob trying to pass on increases in his/her mortgage to you due to rising interest rates. But if you threaten to move out they could well back down as they face the possiblity of a long void period and then having to accept less than you're paying right now. You're in a strong position so fight it!!!

This is spot on - a landlord's worst enemry is void periods during which the income stream dries up. Emphasise the fact you have been good tenants, that you want to stay, but that you will not accept any rental increase and see what happens.
Thursday 20 September 2007 10.25am
I disagree.

Rents were pretty static for quite a while (maybe 5 years) completely failing to mirror the increase in property values. Before then though there had been a pretty massive rise in rents.

However about 18 months ago they started to rise again. Landlords had started selling their buy to lets partly because yields were low, and also because many reckoned it was a good time to cash in. And first time buyers were putting off buying because they either could not afford to buy or were concerned about rising interest rates and the danger or negative equity.

So at the moment there are a lot of people chasing available rental property. The market is skewed by the number of new "luxury" flats, but for other sorts of property, including cheaper flats or family sized housing, the demand is rising but there is almost no new supply. (We got an interesting insight into the sort of accomodation on offer when a previous au pair was looking to move out. Slum landlords, severe overcrowding, illegal sub-lets, and none of which was cheap. The Polish plumber needs to live somewhere and will put up with a lot to have enough money to send home.)

I disagree that Landlords charge on a cost plus basis. They try to get what they can. It might be that your landlord might be interested in selling up. So he is trying it on a bit and either you pay up or leave the property vacant. Or he thinks he can get more on the open market. And he probably can.

The increases you quote dont sound unreasonable. It depends where you started from. I reckon I have received about a 75% increase in the last 10 years. A lot, but no way in line with the capital increase.
Thursday 20 September 2007 12.02pm
Another way of looking at this would be that, in a time when capital values are rising quickly, you could expect rents to stay the same/fall/rise considerably more slowly.

A landlord should be doing their sums based on total return on investment. Their purchase price doesn't change. But if capital values go up then that increases their return and so they need less rent to make an acceptable overall total return (capital plus income - i.e. rent).

But, as Sarah points out, people will try to charge as much as they think they can get.

[We've had no rent increases in 4 years]

...if you press it, they will come.
Thursday 20 September 2007 12.15pm
The papers have been talking recently about as much as 25% increases in rental prices in Central London - and remember SE1 is increasingly 'central' as it becomes more fashionable.

Remember property prices have risen by that (or more; much more in parts of SE1) over the last year; sure as eggs is eggs rental increases will follow.

Supply is dropping (because some BTL investors are selling up as they think the market will drop), demand is increasing (as some owner occupiers are selling/delaying buying as they think the market will drop).

Both those will lead to rent increases.
Thursday 20 September 2007 12.56pm
And, joy oh joy, Foxtons seem to be calling on a near weekly basis, to see if I have property available. A sure sign that they are short of properties to rent.

But none of this probably helps Bluefish. Look around, see if there is an alternative. (Estate agents will soon tell you if there is any hope of finding similar on your budget.) If not you either pay up or become yet another person squeezed out of this increasingly unaffordable area. (Though also do look into shared ownership and affordable rent schemes.) The only compensation being that the area will change to match the new population and so it wont be the place you knew. Plus SE1 as a virtual community is not dependent on what rent you can afford.....
Thursday 20 September 2007 5.24pm
>>Plus SE1 as a virtual community is not dependent on what rent you can afford.....


Quite, there are people who have left this dump of an area and who now live in nice parts of London like Duwich and W1.

BTW, Sarah, I drove past your door the other day; nice street.
Thursday 20 September 2007 5.40pm
Are you the latter?

Housewarming?
Friday 21 September 2007 9.04am
Our landlord has put our rent up the past two years, first by 4% and this year by 5.5%. When we queried it, using the argument that we have been there 3 years and been good tenants, they just said that they could get lots more for the flat than we're paying, so we should shut up (or words to that effect!).

I don't think there's much you can do, except appeal to their kind hearts, because we live in a free market, and they can charge what they like.
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