Flat Housing Market
March 3rd, 2008
Flat Prices and the Buy to Let Market
If you’re a homeowner, then you’ve probably been alerted to the sudden slowdown in housing prices. According to research by Nationwide, house prices fell by 0.5% in February, the fourth consecutive monthly decline. This decline brings the annual rate of house price inflation down from 4.2% to 2.7%.
Across the board, analysts are warning of house price a slowdown, with the predominant opinion being that they will prices be subdued for 2008. Some areas, however, will fare better than others, but one area where there is particular concern is with flats.
Many apartment developments have been built in recent years to serve demand for buy to let investors. In Leeds, which is one of the fastest growing cities in the UK, there were only 1800 city centre flats in 2003. However, by 2007 a further 3,900 has been added, while 3812 were under construction and 5622 had been given planning permission. Amazingly, with all of this development in place, a further 6262 are still being planned.
These statistics might sound crazy, with the amount of flats becoming available being likely to outstrip demand. Alastair Stewart, Housing Analyst at Dresdner Kleinwort was quoted in a BBC report as saying, ‘selling lots of identikit apartments into a very illiquid market, with not much demand… valuations have to go significantly down, and I could easily see 20% or 30%.’ Such a forecast seems especially worrying when two bedroom flats make up a third of UK property.
But despite the wild figures and the gloomy predictions, there is still plenty of evidence to say that the buy to let property market is continuing to thrive. At the end of February the Council of Mortgages Lenders released figures stating that the number of buy to let loans rose by 23% last year, and they now account for 10.3% of all outstanding mortgages.
Michael Coogan, the CML’s director general, stated: ‘Tenant demand for private rented property remains strong, and buy-to-let fulfilling an important role in helping to deliver an increased flow of high-quality homes to rent.’ It seems likely that demand will continue to outstrip supply for the time being, especially with rising immigration. However, it remains to be seen if this growth can be sustained over the long term, with plans for so many new developments already in place.
If you’re looking for property in the coming year then take a look at Fish4 for a great online marketplace for property. When you’re looking to refinance or wanting to take out an initial mortgage then take a look at Natwest for mortgages.