Empty Blocks of Flats
At the height of the recent property boom, the type of building that proved most popular with investors was the individual flat in a block. Whilst converted flats in existing dwelling houses have always been popular, especially in city locations, these were in the main owner occupied by persons wishing to be near to their place of work or by persons with smaller families, wanting to get a foot on the housing ladder but unable to afford city prices for larger properties.
The property boom brought about unprecedented construction of new style purpose built blocks flats, in almost all parts of the United Kingdom. As well as purpose built blocks, it became fashionable to convert former commercial premises such as factories and warehouses. These types of properties, with their different layouts and often period features where very much in demand. Whilst many developments have sold well, those constructed in sub prime areas are proving difficult to sell or rent and now Britain is in the grip of an economic downturn, things are even tougher for property developers. More applications were received by local authorities for planning permissions for flats construction, than for any other type of property. Now, however, many blocks are now empty buildings. The reasons for this are numerous but, the following factors are important.
- Developers are unable to sell the property because of the price required and the general slump in the housing market.
- Purchasers are reluctant to buy because of an inability to borrow money and concerns over negative equity.
- Speculative purchasers who obtained property off plan are reluctant to sell at a loss and are “sitting” on property
As well as people wanting to obtain a footing on the property ladder, many new build flats were snapped up by landlords or buy to let investors, who were attracted by the lower costs associated with flat purchase and the statistics that seemed to back up the need for more economical dwelling spaces from single occupiers or couples. In simple terms, they were cheaper to buy, there would for a strong demand from renters and as property prices were rising, they looked a good investment bet. As well as the perception that there would be a strong demand for leasehold flats, another factor that helped fuel excess construction was the ability to buy the property’ off plan” This method of acquiring property was very popular and in essence it enabled a person to purchase a property before it had been constructed for a minimal initial outlay.
The proposal of buying off plan, looks very attractive when property prices are rising and there are a number of other key benefits associated with this method of purchase.
- When you buy off plan, the price is cheaper, often you are buying directly from the developer or their chosen agents and discounts on the finished price of up to 25% are not unusual.
- A low deposit is required, often as little as 7.5% of the purchase price.
- In a rising property market, high returns look guaranteed as you purchase your property at ‘locked in” price
- Sometimes, it can take as much as 3 years for the properties to be completed, plenty of time for equity to increase.
- Payment for the property comes in stages so you do not have to find all the money at once.
- Prices can often be negotiated.
- In many cases, the developer will guarantee to rent the property for you.
The present state of the market, is now seeing a demand for flats on the increase. Despite the rather perilous state of the housing market, rental yields are actually increasing and in many areas and there is a strong demand for rented property. Because renters are wishing to keep costs to a minimum, the more compact flat is seen as being preferable to a house. Many renters people feel that as renting is a short term option, they are happy to live in smaller premises. until such time as conditions improve in the housing markets.
As well as this, there is no doubt that in the long term, demand for flats will increase from both purchasers and renters. The statistics relating to changes in lifestyle and other social & economic factors simply cannot be ignored.