1 Bed Flats or 3 Bed semis.

kriss_boy

Has anyone researched the market or analysed which types of property were more significantly overvalued during the boom.

Were people paying too much for a 1 bed flat, a 3 bed semi or was it just across the board?

When I was looking for a place in early 2008 there were an awful lot of delipitated flats that really shouldnt have achieved anything like what they did. You'd narrowly miss out on a really nice 2 bed flat at around 80K, only to watch one in the same street sell for 70K despite needing 20K spent on it.

It was as though there was a desperation amidst FTB to just get on the market and ride the crest of the property boom asap.

Time and time again my farther and I would tot up how much a property needed spent on it, with ourselves doing all of the work, only to see it exceed that figure by 10K.

Thrugelmir

kriss_boy wrote: »

Has anyone researched the market or analysed which types of property were more significantly overvalued during the boom.

Were people paying too much for a 1 bed flat, a 3 bed semi or was it just across the board?

When I was looking for a place in early 2008 there were an awful lot of delipitated flats that really shouldnt have achieved anything like what they did. You'd narrowly miss out on a really nice 2 bed flat at around 80K, only to watch one in the same street sell for 70K despite needing 20K spent on it.

It was as though there was a desperation amidst FTB to just get on the market and ride the crest of the property boom asap.

Time and time again my farther and I would tot up how much a property needed spent on it, with ourselves doing all of the work, only to see it exceed that figure by 10K.

All property was overvalued. As unlike say a painting. A property has a cost. Simply put land value plus construction cost.

FTB were driven out of the lower end of the market by BTL investors.

Property became valued on rental yield in relation to mortgage cost. A never ending rising market was expected to create huge capital gains to cash in with. Trouble is like most markets ultimately. The rise was incestuous with BTL competing with themselves causing a price spiral.

mewbie_2

Thrugelmir wrote: »

All property was overvalued.

I agree to some extent. But I think the total madness was towards the bottom end because cash rich investors tempted by the potential profits could easily mew a hundred grand or so out of their properties to get into the lower end of the market. A whole industry was built on building new flats to supply not the demand of tenants but the demands of investors.

So I think the bottom end has much further to fall in percentage terms than the middle / top ends.

Thrugelmir

mewbie wrote: »

I agree to some extent. But I think the total madness was towards the bottom end because cash rich investors tempted by the potential profits could easily mew a hundred grand or so out of their properties to get into the lower end of the market. A whole industry was built on building new flats to supply not the demand of tenants but the demands of investors.

So I think the bottom end has much further to fall in percentage terms than the middle / top ends.

Now that normality has returned to the market. These flats will enable FTB's to make the first step onto the property ladder. The correction may take some time as the adjustment to save larger deposits won't happen overnight.

ukcarper

If you look at land registry you will see average semi has dropped 16.6% march 08 to March 09 while flats dropped 17.5% over same period. Funnily terraced dropped less than both at 16.2% while detached faired the best a 15%.

kriss_boy

I agree BTL investors drove the prices of smaller properties up, but doesnt that mean they will do the same again as prices are dropping?

mewbie_2

kriss_boy wrote: »

I agree BTL investors drove the prices of smaller properties up, but doesnt that mean they will do the same again as prices are dropping?

It would be interesting to see what price drops the typical BTL property - ie new build flats and houses - 1 to 2 bedrooms, have suffered since the peak. Where they are back to in price terms, and what percentage of BTL investors are now looking at a loss on their investment? Those who have lost probably have very little left to purchase anything else with.

The other interesting figure would be the proportion of BTL investors who bought for quick cash gains, rather than any plans to become a long term landlord. Many of their purchases were not even rented out, but were flipped where possible to make quick buck. No reason to buy now / next year, when the future for HPI at best will be to get back to normal boring levels.

Finally, I suspect most investors in bubbles leave that particular investment not to return. If successful they move on elsewhere - gold, shares, antiques, etc. If not - well they're busted anyway. There will be those who missed the BTL craze and still harbour dreams of striking it rich, or even just providing a modest income. I don't think they will be in sufficient numbers, or have access to easy cash in the same way, as to make a scrap of difference to house prices in the foreseeable future.

BTL will be a historic blip in a few years. The next hot thing will be along - be it windmills, electric cars, maybe even another dot com style boom. Personally I'm hoping for ostriches to make a comeback.

epz_2

The reason most people suspect 1bed flats will get hammered most is one of practicallity.

Assuming you keep your job then odds are your personal circumstances are unlikely to force you to move, the same cant be said for flats.

Any small flat owner would likely want to expand at some point if they want kids and while the low interest rate is protecting BTL owners many will get hurt and forced to sell once interest rates go up again.