Bad numbers

Rents are typically 10 per cent more expensive – although in some towns, they exceed mortgage payments by almost 40 per cent, according to the research by property website Zoopla.

Err, no.

For with a mortgage comes the maintenance bill, something that renters do not have to pay.

9 thoughts on “Bad numbers”

  1. Maintenance to my flat is running (I estimate) at about 1% of the rent. And my flat was gerrybuilt in the construction bubble when builders couldn’t give a toss (or more especially so).

    The biggest factor with risk and rent is that of voids: if the turnover of tenants is relatively high (say every 12 months) then a void month between tenants is pretty close to explaining that gap (the 10% one).

    The 40% one is in clear need of some arbitrage..

  2. I never trust those sort of surveys, but the obvious question (I didn’t see this in the article but maybe I missed it) – surely that’s the interest only component of the mortgage? If it includes repayment then houses would be vastly cheaper.

    On costs, my mortgage payment is about £1,500/month, of which interest is about £1,000/month, so £12k/year. Maintenance I think is probably £1,000 a year (mainly lumpy payments such as a new boiler, or shed roof).

    So I’d say it could be 10% of the interest-only component.

  3. The old advice was something like “set 5% per annum aside for maintenance and improvements”. How old I don’t know: pre-Noah?

  4. Saying that renters don’t have to pay maintenance strikes me as pretty similar to saying that companies pay tax.

    Of course, they don’t actually write the cheques, but where does anyone think the money comes from?

    The customers, in the latter case, and the tenants, in the former.

    There ain’t nobody else, unless the landlord is prepared to make a continuous loss.

  5. Andrew’s correct, obviously, but that’s question-begging: the point is, headline rents are:

    [opportunity cost of dwelling] + [maintenance cost of dwelling], whereas house prices are those two plus:

    [expected annual capital appreciation] – [finance costs] + [adjustment for irrationality]

    Re the 40% figures, I’d assume that’s the rent for a 2-bed in Leeds (/other provincial city), where the last two factors are both “large negative”.

    In Sydney at the moment, where there’s still a property boom, the expected annual appreciation is high but the mortgage interest rate is about 8%. I’ve worked out I’m literally saving money by keeping my money in the bank at 6% and renting (inflation is about 2.5% at the moment), at least as long as my landlord doesn’t jack up the rent.

  6. Bugger, spoiled my last post by remembering finance costs. In Leeds, mortgage rates are obviously fuck all like in the rest of the UK, but the other two below-the-line items are large and negative.

  7. Andrew – (I think John is saying this as well!) the point is that the rent is quoted inclusive of maintenane, the mortgage cost obviously not.

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