What to Buy/Not to Buy?
Welcome to the first ever edition of ‘WHAT TO BUY….’ Property Hawks monthly round up of what is happening in the residential investment market. Too busy to keep up with the latest trends and developments? Worry no more, just read ‘WHAT TO BUY’ and stay ahead of the herd!
WHAT TO BUY?
House prices continue to rise but at a slowing rate in August according to HBOS latest figures. Prices are up 1% in August but only 0.2% over the previous 3 months. The annual price rise has slowed to 8.2% from 9.4% in June.
A celtic killing!
For those in Northern Ireland, Scotland and parts of the North the last year (Q2) has been another boom year. According to the Halifax House Price Index Antrim and Lochgelly in Scotland are the UK’s top property hotspots both exhibiting 36% rises. This takes their average price to £146,761 and £93,731 respectively.
Martin Ellis Chief Economist for HBOS commented:
“Towns in Scotland and Northern Ireland have seen the strongest house price rises in the UK over the past year, largely reflecting the more favourable housing affordability position in these two countries compared to the rest of the UK. Indeed, all ten towns delivering the strongest price rises over the past year have average house prices below the national average.”
Top of the risers in Scotland for new properties over the year to June 06 was Glasgow as revealed by a recent survey by Smartnewhomes.com with a 9% increase reflecting strong demand from the high numbers of graduates in the City.
Despite these increases it is still possible to pick up houses for less than £100,000. However there are now only 5 towns where the average price is less than £100k compared to 130 in 2003. You need to head north to pick up these bargains. Two Fife towns – Kelty (£92,140) and Lochgelly (£93,731). Nelson in the north-west has the honour of being the cheapest town in England with an average price of £99,117.
London – top of the world!
Greater London was the best performing region in the last 12 months to the end of June showing a 10.9% increase. These rises have been fuelled by high rates of immigration, continued shortage in property and a strong economy.
Anybody lucky enough to be investing in the luxury end of the market will not have failed to realise that London has overtaken New York and is now the world’s priciest housing market reflecting it’s status a one of the worlds great global cities. CBRE Hamptons International research shows that prime residential property in London on average costs around 1,200 pounds per sq ft compared to New York at 1,000 and Tokyo which is third at around 900. All this is a long way from the costs of an average semi in the midlands and north, which would have a value of between £160-200,000. Prices per square feet for these properties would be around £150 per square feet giving you 8 times the amount of space for your money. The Financial Times reveals that some parts of the top end of the capital’s property market such as Chelsea Harbour and Knightsbridge are so hot that when properties go on the market they are being ‘snapped up’ in hours rather than days as a weight of foreign buyers compete with City workers ‘wedged up’ with forthcoming bonuses.
Houses are in and penthouses are so passé!
Well if the latest information released by SmartNewHomes.com is anything to go by you would be better sticking your ‘cash’ in a traditional semi rather than a ‘swanky’ new apartment. Their figures showed that it was the semi was the ‘hottest property’ in town showing an increase of 10.7% in one year (Apr 05-06). This figure is borne out by the most recent figures available from HBOS (formerly the Halifax). These showed that in the year from the end of Q2 2005 new semis were up a massive 18.4% compared to a virtual 0% change in the price of apartments. All this demonstrates the allure of a garden and garage and also possibly indicates that the market for apartments is becoming saturated with latest figures revealing some 58% of all new builds are of this type. This assertion has been backed up by anecdotal research by Winkworth the London based estate agent, which found that demand for family housing in the capital was much stronger than for flats. They suggest that shortage of supply and strong demand from owner-occupiers have caused prices for houses to rise by 25% in some parts of the capital, whilst flats had seen only a 15% uplift in the same part of town.
WHAT NOT TO BUY…..
Wales has been the region to avoid over the last year according to HBOS figures up to the end of June 06. During this time prices has risen by a miserly 3.5% rise. Even worse was the latest quarterly performance of minus 0.8%, which showed that it was the only region in the U.K to record a fall in prices. The southwest also performed less impressively than the rest of the country with a 5.3% increase compared to 9.4% nationally. In amongst this increase there was a wide variety of performance exhibited by individual towns, which helped mask the poor performance of some more established locations such as Exeter (-3%), Salisbury (-4%) and St Austell (-3%).
Scottish long-term underperformance
Despite Scotland’s strong showing recently in the house price stakes, up 14.5% on the year; it’s still the worst performing region since 1983 (index 100) with it’s index recording just over a 4 times increase to 420.2. This compares to Greater London as the best performing region where in the same period prices have surged ahead over 6.5 times to give an index figure of 665.6. All this suggests that demand and supply have a stronger impact on price than value.
City centre caution
Finally, Property Hawk would caution about investors plunging into the city centre apartment market which in some regional centres is close to over supply as ‘frantic rates of development’ over the past 5 years have filled our cities with large homogeneous blocks often sold to investors. The problems with these units is that their very ubiquity forces landlords to compete with each other for tenants driving down rents and yields.
The Residential Landlord Association (RLA) has recently warned about the potential over supply of city centre apartments with 58% of new dwellings being apartments compared to 42% just 2 years ago. This spring 20,000 apartments of this type were built, compared to only 7,000 in the same period 6 years ago.
Property Hawks tip is, if you are thinking of a city centre investment; look to pick up a repossessed second hand property, possibly at auction. Have a look at the auction search on the HOMEPAGE. This allows users to search from a database of over 200,000 properties to find up and coming auctions and properties that might ‘fit the bill’. This extensive and highly recommended service allows you to identify up and coming auctions and properties and also do extensive research into previous transactions and prices. Property Hawk has secured an exclusive deal with EIG to offer a one year membership for £295 + vat (normally £395). For further details phone Bruce Wilson on 01737 232 285 quoting the reference PROPERTY HAWK. This may sound expensive but if you can trace a suitable property you could end up saving literally tens of thousands over buying a similar new property, which suddenly makes this outlay seem very small. To find out more about buying at auction, have a look at the Auction section in the Landlords Bible.
Another tip if you are thinking about buying in a city centre unit, which do have the advantage of an established rental market; is don’t buy in too large a development. Also look to invest in units that have something unique about them such as an outside terrace or maybe some unique architectural features. Anything that will make your property ‘stand out’ from all the others and make it a little more desirable.