Dark clouds of cuts cast gloom, but there’s op­ti­mism out there

Is the fore­cast for res­i­den­tial prop­erty over­cast? In­vestor Gra­ham Bates has some post-sum­mer pre­dic­tions.... Be­yond sum­mer, where is the mar­ket head­ing?

Yorkshire Post - Property - - PROPERTY -

THANK­FULLY, the main res­i­den­tial prop­erty in­dices have been on the up for most of this year. How­ever, the small in­creases we have seen across the mar­ket as a whole now ap­pear to be fal­ter­ing and it seems likely that there will be fur­ther weak­ness across the sum­mer months.

Re­cent hous­ing de­mand has eased, with the Bank of Eng­land re­port­ing a dip in the num­ber of mort­gages ap­proved.

While the Hal­i­fax re­ports house prices up 6.3 per cent on a year ago (Na­tion­wide’s fig­ures be­ing slightly ahead of this), it seems in­creas­ingly likely that house prices will be broadly un­changed over 2010 as a whole.

Are we now out of the woods? There is prob­a­bly some way to go but there is now light at the end of a long tun­nel. The Hal­i­fax says that house prices are up 7.5 per cent from the bot­tom of the mar­ket in April 2009 but still re­main 17 per cent be­low the peak of Au­gust 2007.

While fur­ther sig­nif­i­cant falls are un­likely, 2011 is go­ing to see the Chan­cel­lor’s new fis­cal squeeze kick­ing in with the like­li­hood of sig­nif­i­cant job losses and many peo­ple are go­ing to be hit in the pocket.

Against this back­drop, it is hard to be op­ti­mistic about the out­look for res­i­den­tial prop­erty val­ues and it is not un­rea­son­able to ex­pect that sales ac­tiv­ity will con­tinue to re­main at a low level for the next 18 months.

Buyer in­ter­est fell for the first time since the start of the year while prop­erty com­ing on the mar­ket in­creased at its fastest pace since May 2007.

The RICS said one of the fac­tors driv­ing the in­crease in sell­ing in­struc­tions was a re­duc­tion in the amount of leg-work needed to mar­ket a prop­erty with the abo­li­tion of “home­buyer in­for­ma­tion packs”.

Of course, the res­i­den­tial prop­erty sec­tor is made up of many mi­cro-mar­kets and trends dif­fer con­sid­er­ably at a lo­cal level. Equally, the mar­ket for in­di­vid­ual owne­roc­cu­pied dwellings is very dif­fer­ent from the res­i­den­tial in­vest­ment sec­tor.

At a time when banks are man­ag­ing large books of dis­tressed prop­er­ties, pa­tience is go­ing to be the key word where dis­pos­als are concerned.

This is es­pe­cially so with apart­ment stock al­though as with all prop­erty types, qual­ity blocks will, in our view, stand the test of time as there re­mains sig­nif­i­cant de­mand for apart­ment liv­ing (city and sub­ur­ban) across all parts of the UK.

Lower qual­ity schemes in less at­trac­tive lo­ca­tions will get a harder ride and, in some cases, will find their true value level well be­low orig­i­nal val­u­a­tions with lit­tle chance of re­cov­ery in the medium term.

How­ever, there is cause for greater op­ti­mism in re­la­tion to well con­structed, de­sign-led schemes in the right lo­ca­tions, not least be­cause there is sig­nif­i­cant rental de­mand.

In Leeds to­day, ten­ant de­mand is gen­er­ally greater than the avail­able sup­ply of apart­ments with both the city cen­tre and sur­burbs now be­ing long proven as suc­cess­ful in­vestor territories.

Else­where the trend is the same; Ed­dis­ons Res­i­den­tial is man­ag­ing schemes through­out York­shire as well as across the Mid­lands, North West and North East where high oc­cu­pancy lev­els are also be­ing achieved.

So where should long-term in­vestors be look­ing to buy within the Leeds mar­ket? Sub­urbs within easy trav­el­ling dis­tance of the city and with good trans­port links, such as Chapel Aller­ton and Mean­wood, con­tinue to per­form well but cheaper ar­eas such as

There is cause for great op­ti­mism in re­la­tion to well con­structed schemes in the right lo­ca­tions.

Crossgates are also show­ing good ten­ant de­mand.

In the city, find­ing a prop­erty within easy walk­ing dis­tance of the cen­tre is im­por­tant.

One of the new­est de­vel­op­ments, which is prov­ing very pop­u­lar with ten­ants, with real de­sign flair and a “ho­tel” feel is Manor Mills. Just a short walk from the rail­way sta­tion and min­utes from the mo­tor­way net­work, only a few apart­ments here have been re­leased for sale but it is likely to be one of the build­ings that will stand the test of time. In sum­mary, the ex­pec­ta­tion is for a slow sec­ond half of the year with a sales mar­ket that con­tin­ues to be dif­fi­cult through­out 2011 but with rental de­mand con­tin­u­ing to be strong. In such a cli­mate, buy­ers who are mort­gage ap­proved or in­vestors with cash avail­able may be sur­prised not to find more deals out there but the re­al­ity is that for the most part sell­ers (in­clud­ing the banks) are sit­ting tight and wait­ing for the mar­ket to re­cover.

In the long run, this can only be a good thing for res­i­den­tial prop­erty val­ues and the mar­ket as a whole.

Gra­ham Bates is a prop­erty in­vestor and di­rec­tor at Ed­dis­ons Res­i­den­tial, which pro­vides strate­gic ad­vice on sales and prop­erty man­age­ment on res­i­den­tial prop­erty across the UK. Call 0845 6060789.

RAYS OF LIGHT: Leeds city cen­tre is see­ing de­mand ex­ceed­ing sup­ply for apart­ments, and well-lo­cated sub­urbs are per­form­ing well.

MIXED PIC­TURE: The sec­ond half of the year is likely to be slow.

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