My Blog

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.

A friend of mine was telling me the other day he was going to buy some property on an island. It sounded like a crazy idea. However, once he began to explain his intentions further, I thought the idea was worth more research on my end. Even it was possible and an intelligent property investment, I did not want to be left out of any deal. He said the island was located in the Mediterranean Sea off the coast of Greece. The island is officially known as the Republic of Cyprus. I went to the hall closet to grab one of my kid’s world maps so I could better comprehend the location of where this Cyprus property existed. There it was on the map. In reality, the island is a pretty substantial piece of land. It is not quite the deserted island lost in the Pacific Ocean where native inhabitants have still been undiscovered. Instead, it is a flourishing, developed European country located right in the middle of the Mediterranean Sea. My friend pulled out some pages he had previously printed off a website on the Internet to explain further how the investment would work. Apparently, there is a good portion of property for sale in Cyprus. Although not ever piece of land on the island is as valuable as another. It is important to research the island and determine which areas have the greatest property value and subsequent return on my investment in the future. If I am going to be paying a monthly mortgage on the piece of property, I by all means want to make sure it is going to be profitable for me. The whole process is going to be tricky because I do not plan on moving to Cyprus. I will be managing this piece of property from my home in the United States. However, the new property would be an ideal place to take the family on a vacation. My wife and kids would love to travel across the Atlantic Ocean and visit Europe. There is some much to see in other countries and so many different cultures to experience. Owning property overseas will give my kids the opportunity to develop a greater awareness of the world around them.

A couple of days ago, I got a call from my aunt from a central European country (see, I am so popular that chances are, you know me…and in that case, you might know my aunt in central Europe…just kidding…got it?:-)). So, she asked me about how I have been, and bla-bla-bla, I said that I am fine (well, she really does not want to know about all my little things…you know…). After about an hour and a half of our conversation (thank you, Verizon, for not cutting the service on me!!), I figured out that she is moving to States with her husband, and they are moving to Texas. Okay. I mean, I am happy. Well…maybe not so much. Well, no, I really am. Whatever. The bottom line was that she wanted me (why me??) to find a place for her to live in Houston, TX. I tried to say that I was kind of busy, but her direct tone and warning intonations right away made me realize that maybe being busy at that period of time is not the best thing that I could do in my life…if I wanted to live sanely and more or less calmly…If not, I could totally expect her to blow my calmness away…and that’s it, the end of the story.

So, the first thing I did after hanging up with my aunt is that I called a group of Houston realtors that I found online (go type “Houston Real Estate” in Google and see what YOU get!). Obviously, the type of living number one that they suggested was Houston condos. When I inquired about the average price of those, I realized two things. First, I did not wish my aunt bad. Second…by the time I was done realizing the first thing, I forgot what the second one was.

Then, I opened up the map, and started to feel like a detective. Having never been in Houston, I figured that I’d just pick some of the areas that seemed nicer to me and see what that gives me. Google always helps, so after typing in “Central Houston real estate”, “Houston Heights Real Estate”, “Houston Memorial Real Estate”, and “Houston Medical Center Real Estate” and looking at the prices, I figured that typing in “Houston Homes For Rent” will help much more… and so it was! Out of all Houston, TX, real estate combinations, I realized (for which time I am realizing something in this process??) that renting would be a much better deal for them…my aunt and her husband, I mean. After all, if you rent, you are not tied to the place as much, and is that not what I wanted in first place??