Buy to let investors are avoiding new build properties claims letting agent
Added 17.11.09
Although buy to let investors are increasingly optimistic about the recovery of the housing market they are avoiding new build flats more than ever, reveals research by one of London’s lettings agents.
Figures compiled by Ludlowthompson.com say only 12 percent of investors who are planning to increase their property holdings in the next six months expect to buy a new build property. This is down from 26 percent in March.
Ludlowthompson.com says that developers overbuilt apartment blocks during the boom but weren’t able to sell them after the crash. To clear stock, some developers have been selling units to bulk purchasers at exceptionally big discounts. Because they can buy the property for less, bulk buyers can demand lower rents and still make the deal work, which pushes down rents throughout the new build market.
Stephen Ludlow, Director of ludlowthompson.com, said: “Bulk purchasers can undercut individual investors on rents and still achieve a profit because they paid far less for the property in the first place.
“Developers are being forced to make bulk sales by banks who want to recoup their loans, even if it means increasing the discount on offer.
“New build flats are often built in huge blocks with other identical units. They are almost a commodity. With so many similar flats going on the market at once landlords have to compete with each other directly on price in order to fill their property.
“New apartments can lose their premium over second-hand properties within a couple of years of completion, almost like a new car as it leaves the forecourt.
Investors have seen this happen repeatedly over the last few years and are now more cautious about buying new build properties.
“The problem of oversupply of new build property is particularly bad in regional cities like Manchester, Leeds and Nottingham.”
According to ludlowthompson.com’s survey, buy to let investors are on the whole much more confident about the residential property market:
• 73 percent of buy to let investors expect house prices to rise over the next six months
• 89 percent expect rents to stay the same or increase.
• Nearly a quarter (24 percent) expect voids to decrease over the next six months.
Ludlow concluded: “Buy to let investors are now optimistic on capital values, rents and voids. If their optimism proves to be well-founded then residential property looks like an excellent investment option, even though there are still some lingering areas of concern.”
News feed courtesy of Residential Landlord