Cost of Living
The headline in the is article from The Scotsman highlights a tiny 0.2% fall in the average monthly rent, but the real story is that rents have continued to increase over the past six years the cost of servicing a mortgage has fallen dramatically.
In other words it's impossible to have a sensible debate about the cost of living, if a political discussion doesn't take people's housing costs into account.
The average residential rent in Scotland now stands at £536 per month, dropping from a record high in August, the latest Scotland Buy-to-Let Index from Your Move found. Picture: TSPL
By LUCINDA CAMERON - The Scotsman
RENTS IN Scotland fell by 0.2% in September, the first monthly drop in three months, according to a new report.
The average residential rent in Scotland now stands at £536 per month, dropping from a record high in August, the latest Scotland Buy-to-Let Index from Your Move found.
Average residential rents across Scotland are still 2.0% (£11) higher than a year ago, but this represents a slow-down of growth on an annual basis.
Annual rent rises have eased off from 2.7% last month, and dropped from a 3.1% annual change in the year to September 2013.
Rents fell on a monthly basis in four out of five regions of Scotland in September, with Edinburgh and the Lothians the only area reporting growth.
Housing experts warned that the pace of growth could cool further after the latest LSL Landlord Survey found landlords expect rents to rise just 1.8% over the next 12 months.
Gordon Fowlis, regional managing director of Your Move, said: “Talk of tenancy reforms to cap rents seems widely out of touch with reality. The private rented sector is hardly a runaway train that needs reining in - rent rises are slowing on an annual basis and retreating back in line with the target rate of inflation.
“The last time the Scottish Government tinkered with lofty lettings legislation, their good intentions didn’t filter down to the thousands of everyday renters on the ground. The abolition of one-off tenancy fees hoisted rent rises up to an artificial pace after years of stability.
“Now, adding more strings to the web of legislation encircling landlords may push them to cut loose altogether, as well as stop attracting new buy-to-let investment. In this way, rent controls will actually accelerate rent rises from the healthy trajectory they are currently on.
“At a time when the country is facing an acute shortage of housing, and as the Government is already increasing the tax burden on many home buyers with their Land and Buildings Transaction Tax (LBTT), putting a cork in supply will only sour tenant finances.”
The report found that taking into account price growth alongside void periods between tenants, the total annual return on an average rental property stands at 9.5% in the 12 months to September.
This means the average landlord in Scotland has seen a return, before any mortgage payments or other deductions, of £14,392 in the last 12 months.
The report found that if rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in Scotland could expect to make a total annual return of 5.0% over the next year, equivalent to £8,019 per property.
There was a slight improvement in the health of tenant finances last month, with the proportion of late rent at 6.4% in September, down from 6.5% in August.
Who Gets What and Why? (21 October 2014)
The BBC used this chap as a 'case study' in its coverage of the recent health workers strike in England, Wales and Northern Ireland (Scotland was not affected, by the way, because the Scottish Government agreed to pay the 1% 'across the board' increase recommended by the Pay Review Body).
Anyway back to Mick Bowman who is a mental health social worker and does a very demanding job for Northumberland County Council.
But what the BBC report doesn't tell us is what Mick gets paid by way of a salary because that would tell you whether his job is low paid or relatively low paid - or whether he is in a higher earning job and, depending on his grade as a social workers, that might well be the case.
So as much as I might empathise with Mick, the people who are really feeling the pinch are those on very low pay, the thousands of NHS employees at the very bottom of the pay ladder.
Something else that would be instructive to know is whether Mick has a mortgage because if that is so, then his housing costs are likely to have fallen substantially over the past some years, as a consequence of artificially low interest rates the UK has enjoyed since 2008.
Compared to, say, a very low paid NHS worker who doesn't have a mortgage and pays rent to a housing association, local council or a private landlord.
So the business of who gets why and why is more complicated than just pay increases - what counts is the bigger picture and what other costs need to be taken into account in a debate over the cost of living.
Case study: 'My lifestyle is pressured'
Mick Bowman, 56, is a mental health social worker for Northumberland County Council who lives in Newcastle and is taking part in the march in London.
"I've not had a pay rise for four years so with the cost of living rising, that's a very substantial pay cut," he said.
"At the same time my workload has increased and my job's become more stressful.
"At the end of every pay month I have to use my credit card to live on. I last had a holiday three years ago. So my lifestyle is pressured.
"I feel extremely angry about this. The national deficit was manageable and the way to deal with it is not to cut jobs and shrink the public sector.
"It's time to invest more in the public sector and get people into a position where they are able to spend more and put more money into the tax system."
For more reaction from the protests click here.
Get Real (21 October 2014)
I caught a bit of a Radio 5 discussion programme the other day which focused on how different people have fared during the recession the country has faced over the last six years since the economy took the biggest nosedive in living memory.
Now it was a mixed bag of contributions, as you would expect, with some folks pointing to a fall in real wages while others were keen to point out that the tax take on citizens has fallen, so to some extent it comes down to swings and roundabouts.
But one chap rang in and was honest enough to admit that his family was actually much better off because his housing costs had fallen by £600 a month as a result of the artificially low interest rates the UK has experienced since 2008.
And unless you factor this issue into a debate on the cost of living, then people are kidding themselves on because there's no point in saying that everyone should be treated equally or fairly in terms of pay rises or tax policy if in practice, mortgage payers get a much better deal than everyone else.
Cost of Living (2 October 2014)
Here's an extract from a report by the ONS (Office of National Statistics) that explains how the Consumer Price Index (CPI) is calculated and as the note at the bottom of the Table says mortgage interest payments are not part of the calculation.
As I've said many times before on the blog site, how can you have a rational debate about the 'cost of living crisis' which Ed Miliband bangs on about all the time when you don't include the biggest single cost facing a huge number of home owners and, of course, 'buy-to-let' property developers.
And as everyone knows the costs of mortgages has fallen significantly over the past six years because of the artificially low interest rates that have been in place in the UK since 2008, while during the same period rents have gone up.
So talking about the effect of inflation as if everyone has been affected equally is ridiculous, as is the notion that there is a 'cost of living crisis' facing mortgage payers because many of them have enjoyed a huge financial windfall since the recession struck.
I rest my case.
How inflation data are calculated
Cost of Living (4 December 2013)
In recent weeks the Labour Party has shifted the focus of its political attacks on the Coalition Government.
No longer does Ed Miliband argue that the economy is stalling or flatlining - instead he says that the benefits of the economic recovery that appears to be slowly gathering pace are not being passed on to hard working families - and that the UK is experiencing a cost of living crisis.
Now clearly this is not true for everyone and while there may be people who struggle to pay their bills and/or put enough food on the table - lots of others are actually much better off because of the artificially low interest rates the country has been experiencing since 2008.
For example, anyone with a large mortgage may be thousands of pounds a year better off - even if they are in a job where the pay has increased very little, if at all, over the past few years.
So it stands to reason that the people facing a big hit to their standard of living has to be someone without a mortgage - someone who pays rent - because their housing costs will have gone up rather than down since the UK economy went from boom to bust.
All of which means that all this talk of a general cost of living crisis is untrue - and that a much fairer policy would be one which targeted help on citizens paying rent because they have not been fortunate enough to have been handed a big financial windfall - courtesy of nothing more than a sudden and fortuitous collapse in interest rates.
Free Money (8 January 2013)
Now my heart almost bled as I listened to the chap claim (convincingly) that as a result of the unexpected drop in his income - that he might not be able to keep up his monthly mortgage payments.
Next my glass eye almost shed a tear as the poor man explained the terrible burden of having his company car taxed and treated - as an expensive benefit in kind.
'What kind of world do we live in?', I thought to myself - before quickly coming to my senses and dismissing his ridiculous claims as so much baloney and hot air.
Because as I've said before on the blog site anyone who has been paying a mortgage in recent years has very little to complain about - compared to lots of other fellow citizens at least.
For example workers in low paid jobs, people who rent instead of owning a property (via a mortgage) - or folks on a fixed income, such as pensioners.
The reason being, of course, that most people in these groups have little - if anything - to show for the artifically low interest rates which have greatly benefited UK mortgage payers in recent years - as can be seen from the previous posts below.
So my advice is simple - don't shed any tears for people losing out on child benefits because they earn more than £50,000 or £60,000 a year - because they don't need or deserve a hand-out of free money from the state.
Windfall Tax On Mortgages (March 4th 2011)
I read a remarkable statistic the other day - which made me stop and think.
The Financial Services Authority (FSA) has apparently calculated that the UK's artifically low interest rates in recent years - have meant an unexpected windfall of £20 billion to the nation's mortgage payers.
Yet another example of the old saying - 'It's an ill wind that blows nobody any good'.
In this case £20 billion to the good - and the bigger the mortgage - the bigger the killing people have made - without any effort or risk.
While those who can't afford or no longer need a mortgage (e.g. low paid workers and pensioners) - have lost out big time, comparatively speaking.
So I have a suggestion for the government and our policy makers.
Bring in a special windfall tax on mortgages which claws back some of this £20 billion - and use the money to reintroduce the 10p tax rate to help the low paid.
Low paid workers will spend the money - because they don't have a lot to start with - and that will help to boost the economy.
Readers will remember that the 10p tax rate was abolished by the 'man with a moral compass' - Gordon Brown - in one of his worst decisions as Prime Minister.
But here's a chance to right a great wrong - help the lower paid - boost our flagging economy - and with money that has simply fallen into people's laps by sheer luck - nothing else.
I read a remarkable statistic the other day - which made me stop and think.
The Financial Services Authority (FSA) has apparently calculated that the UK's artifically low interest rates in recent years - have meant an unexpected windfall of £20 billion to the nation's mortgage payers.
Yet another example of the old saying - 'It's an ill wind that blows nobody any good'.
In this case £20 billion to the good - and the bigger the mortgage - the bigger the killing people have made - without any effort or risk.
While those who can't afford or no longer need a mortgage (e.g. low paid workers and pensioners) - have lost out big time, comparatively speaking.
So I have a suggestion for the government and our policy makers.
Bring in a special windfall tax on mortgages which claws back some of this £20 billion - and use the money to reintroduce the 10p tax rate to help the low paid.
Low paid workers will spend the money - because they don't have a lot to start with - and that will help to boost the economy.
Readers will remember that the 10p tax rate was abolished by the 'man with a moral compass' - Gordon Brown - in one of his worst decisions as Prime Minister.
But here's a chance to right a great wrong - help the lower paid - boost our flagging economy - and with money that has simply fallen into people's laps by sheer luck - nothing else.
