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Flatliners, the death of the inner city apartment?
"Up to last May 2004, prices were quite bouyant, but I suspect that, in the last twelve months or so, prices have actually dropped, maybe 15 or 20 percent. If you bought into one of these flats with a 95% mortgage you could actually be looking at negative equity now.
There are 5000 flats being built at the moment in Docklands and the newer blocks are like "ghost blocks" really. A third have people living in them, another third are people who bought them to rent them, trying to rent them and they are mostly empty. Then you have another third which the builder is desperately trying to sell. So you have people competing with each other in the same block to sell the flats and that`s depressing the prices."
When Peter Bill, the editor of the Estates Gazette, mentions the words negative equity the housing market should sit up and take notice. To then compound his concerns by stating that prices have fallen by 15-20% in the Docklands area could help prick the price bubble that has existed in the area for far too long.
Citing his fears on a TV programme, neatly sandwiched between two episodes of the country`s favourite soap, will have been music to the ears of any first time buyer who wishes to see sense restored to a market place that even experts are now confirming is experiencing a fall.
Could it be the City "lifestyle apartments" which lead and suffer the worst from any potential downturn? If history is to be repeated then this was the sector that experienced the worst downturn in the early nineties.
However, the massive over development of areas such as Docklands could see falls in excess of most expert predictions. A vast proportion of these developments were for the BTL market. Many "investors" have come to realise that the mythical urban professional, willing to pay in excess of their landlord`s mortgage, does not exist in the volume required to make a decent return. In fact the over supply of properties, in relation to desirable tenants, has forced rents down massively.
Time will tell on how inexperienced landlords develop an exit strategy from an increasingly difficult situation.
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