The Pros and Cons of Valuation

This has happened in the past because it’s happened in other countries as well, what happened to rents in those areas? Did they crash as well?I’m just thinking if people own positive cash flow property that pays for their mortgage if a crash happens, will their rents get reduced and they’ll end up in the negative situation?Steve, They won’t fall as much as house prices do. Rent’s really based on incomes, you know?That’s why rents don’t rise as much as prices do in a bubble. They don’t fall as much in a slump.

If people lose their jobs and you, therefore, don’t have the same security income from tenants, but house prices will fall more than rents.Ryan Okay. This makes so much sense to me because let’s say I want to buy a house, if interest rates go down, I can afford to borrow more and therefore, if the whole markets doing that, that pushes prices up. But as a renter, interest rates go down, it doesn’t-affect how much I can pay to rent a property. I’ve got an income that I earn, I divvy portion of that to live and to pay rent and so,

yeah, I understand now why rents wouldn’t-fluctuate and why they don’t fluctuate in line with the property how do property valuations work to market and I’ve never understood that.Steve, I’m glad it helped. The catch that people – yeah, sorry.Ryan I was just going to say do we know how much rents did drop in relation to house price in previous crashes across the world? Or is that just not a figure people really looked?Steve, It’s a figure I could drive, but it’s not the great deal. If you look at the house price crash in America, that was of the order of %.

I think you would find rents might have fallen by %. That sort of thing.Ryan That’s a massive difference.Steve Massive difference, yeah. The reason that people say that they’re okay as long as unemployment doesn’t rise, everything’s going to be fine. Well, the relationship I’vetalked about between accelerating mortgage debt and rising house prices are only part of the relationship.

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