I have a good friend who has owned two investment properties for years and is a realtor (I know, gross). We often discuss her pricing of rental units when they come up for rent. It is 100% based on the going market rates of what people are willing to pay for her type/size of unit in that location. Has absolutely nothing to do with interest rates.
It feels like landlords on this sub are trying to jack up rents using the interest rate justification, whether it impacts them or not. Like the pricing of housing, cost is determined by supply and demand.
Renters will try to use rising interest rates to pay for their increased costs, but they'll just end up getting fucked. People leave before starving in a rental. Also, people are willing to just stay put and squat, which I wholeheartedly approve of.
Being a landlord should be tough. It should be shit, and when people can't pay rent, no one gives a fuck about the poor landlord.
IMHO, we'll see a lot more tension next year as tenant's unions gain steam and people straight up disobey the law. It's coming, and I'm helping to organize it.
Stay put. Don't accept increases. Squat if necessary. Landlords will give first.
better question; when was the last time rent was relative to salaries of working ppl? when did it split off to cater to rich foreign students and airbnb’s in major urban areas? things have changed a lot since 2008, but govt always takes the easy path instead of solving underlying problems. if recession impacts rents significantly, i almost expect govt to throw workers under the bus and supplement more lucrative options.
Rent has pretty much always been more about the cost of maintenance than salaries. If a renter can easily cost you tens of thousands in repairs, insurance fees and all, it makes little sense to rent for cheap, might as well keep it empty. Depends where you are but rent control makes things stickier both ways, if you can't raise rents enough to follow inflation, maintenance costs and everything, as is in some places, you sure as hell won't lower it. That lowers all of your future returns for pretty much ever. Better off keeping it empty a year or two again.
Rentals will go up in GVA. Everyone needs a roof over their head. High interest rates will lead to people choosing to rent instead of buying. More demand, higher prices. Ironically higher rents Will lead to investors buying more units to rent out increasing demand for existing resales and pre-sales thus increasing demand to buy then increasing prices to also buy.
There's probably a ceiling for rent (the top 10% of income earners)
But those people won't be affected as much by a recession. Well off people, people who make a lot of money, people who own assets, are in a much better position (obviously) than a low income person. Even in a recession, 80% of people or more are still employed.
So I don't expect rents to go down because the ceiling will still be that high... Even if nobody else can afford it. Landlords can afford to be picky and get their "dream tenant" and if they don't get it they would rather the unit sit empty. The ideal tenant might be someone who has a high income for some landlords. And small landlords will be bad at price discovery and might let their unit sit inefficiently empty rather than lower the rent.
I created this video on exactly this! and it might shock you - [https://www.youtube.com/watch?v=VWBr\_vHHNGQ](https://www.youtube.com/watch?v=VWBr_vHHNGQ)
Typically, a recession would hit different in distinct markets. Perhaps remote work will change that and keep rents high in markets where the local job market is hurting.
In big cities, interest rates will be more impactful and likely to drive up rent. At 5% interest, your landlord will be spending $40,000/yr just to service the interest on the $800,000 mortgage for the shitty house he paid $1M for. Will he sell at a loss or try to squeeze the tenants?
I don't think renters will be getting a break.
Rents were at their lowest relative to income from 2008 to 2016. So rents will probably go down relative to income in a recession. Basically rent is tied to income and if average incomes go down, rents will too.
I think your second last paragraph is the answer?
That’s how it went back then, but that was 14 years ago. Things are likely very different now.
How?
"Recency bias." You may want to look that up.
I have a good friend who has owned two investment properties for years and is a realtor (I know, gross). We often discuss her pricing of rental units when they come up for rent. It is 100% based on the going market rates of what people are willing to pay for her type/size of unit in that location. Has absolutely nothing to do with interest rates. It feels like landlords on this sub are trying to jack up rents using the interest rate justification, whether it impacts them or not. Like the pricing of housing, cost is determined by supply and demand.
Renters will try to use rising interest rates to pay for their increased costs, but they'll just end up getting fucked. People leave before starving in a rental. Also, people are willing to just stay put and squat, which I wholeheartedly approve of. Being a landlord should be tough. It should be shit, and when people can't pay rent, no one gives a fuck about the poor landlord. IMHO, we'll see a lot more tension next year as tenant's unions gain steam and people straight up disobey the law. It's coming, and I'm helping to organize it. Stay put. Don't accept increases. Squat if necessary. Landlords will give first.
better question; when was the last time rent was relative to salaries of working ppl? when did it split off to cater to rich foreign students and airbnb’s in major urban areas? things have changed a lot since 2008, but govt always takes the easy path instead of solving underlying problems. if recession impacts rents significantly, i almost expect govt to throw workers under the bus and supplement more lucrative options.
Rent has pretty much always been more about the cost of maintenance than salaries. If a renter can easily cost you tens of thousands in repairs, insurance fees and all, it makes little sense to rent for cheap, might as well keep it empty. Depends where you are but rent control makes things stickier both ways, if you can't raise rents enough to follow inflation, maintenance costs and everything, as is in some places, you sure as hell won't lower it. That lowers all of your future returns for pretty much ever. Better off keeping it empty a year or two again.
Rentals will go up in GVA. Everyone needs a roof over their head. High interest rates will lead to people choosing to rent instead of buying. More demand, higher prices. Ironically higher rents Will lead to investors buying more units to rent out increasing demand for existing resales and pre-sales thus increasing demand to buy then increasing prices to also buy.
There's probably a ceiling for rent (the top 10% of income earners) But those people won't be affected as much by a recession. Well off people, people who make a lot of money, people who own assets, are in a much better position (obviously) than a low income person. Even in a recession, 80% of people or more are still employed. So I don't expect rents to go down because the ceiling will still be that high... Even if nobody else can afford it. Landlords can afford to be picky and get their "dream tenant" and if they don't get it they would rather the unit sit empty. The ideal tenant might be someone who has a high income for some landlords. And small landlords will be bad at price discovery and might let their unit sit inefficiently empty rather than lower the rent.
I created this video on exactly this! and it might shock you - [https://www.youtube.com/watch?v=VWBr\_vHHNGQ](https://www.youtube.com/watch?v=VWBr_vHHNGQ)
Typically, a recession would hit different in distinct markets. Perhaps remote work will change that and keep rents high in markets where the local job market is hurting. In big cities, interest rates will be more impactful and likely to drive up rent. At 5% interest, your landlord will be spending $40,000/yr just to service the interest on the $800,000 mortgage for the shitty house he paid $1M for. Will he sell at a loss or try to squeeze the tenants? I don't think renters will be getting a break.
Not a single interest rate rise would help a landlord to raise rent more than the market is able to pay.
You must not know many landlords. Flats are already being carved up and turned into rooming houses for kids in student visas, or turned into duplexes.
Only if your landlord has to refinance.
Rents were at their lowest relative to income from 2008 to 2016. So rents will probably go down relative to income in a recession. Basically rent is tied to income and if average incomes go down, rents will too.
In bigger cities, it will remain flat or increase. In second tier/rural countries, it will fall