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The New Housing Equilibrium....

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Looking ahead the new house price equilibrium which will exist after prices have bottomed out, how will they differ to the position back in 1999 before things went crazy.

Will flat owners who STR’d be better off than those STR’s who already owned family houses before they sold up ?

As a former flat owner and small time (1 BTL) landlord who sold both properties in 2004/05 with the intention of combining the proceeds to buy a house in a new and better area than I was previously living in, I can safely say that having seen the gross yield on the BTL fall from 10% in early 2001, to 5.1% in early 2004 through a combination of increasing capital values and falling rents, anyone who has sold a flat in the last 2 years has definitely made a good move.

Towards the end of last year the area I used to live in had just released a bank of new flats onto the rental market within 3 mins walk of my place, and if you walked 5 minutes in the other direction you’d find that planning permission had been granted to convert 2 adjoining detached house plots into flats.

There are so many new flats available to buy, even in the area I have now moved to, with more planned as we speak (Barratt are taking over Bromley it would appear). The simple laws of supply and demand suggest that this rapid increase in flat numbers has reduced the intrinsic value of each original flat which existed before the flat build splurge of the past 3 years or so, even before taking into account the availability of cheap credit. No way can demand have kept up with supply.

But for anyone who has sold a good family home in the last couple of years thing must surely be a little different. The numbers of good 3 bed plus houses built recently has not been quite as strong. And it hasn’t necessarily been investors that have mopped up those that have been built.

Another important attitude shift is the 2 income family, which is well and truly here, with banks lending 3 and 4 x joint salary being the norm it would appear. In big cities in particular people have now been brainwashed into believing that a family is better off if both parents work because it means they can afford a nicer house.

On this basis could there possibly be a slightly more permanent element to the change in the prices of family homes such that the new equilibrium will not see this particular type of property fall back to the original long term trend because of changes in society’s attitudes.

Also, are people getting choosier about where they live. Does this mean that the new equilibrium will see quality properties retaining an even greater premium than they used to because people are less prepared to settle than before, or because getting your child into the right school is seen as being far more important now that in was back in 1999 or whenever.

Just something to think about.

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During the last boom, many houses were converted into flats, as the market and profit dictated.

The same has happened during this boom.

Sadly the new "luxury" apartments will never be anything other than rabbit hutches.

They aren't versatile buildings.

If there is going to be a massive over supply of these properties, then it would be great to see some of the houses that have been converted in flats converted back into houses.

I believe it happened after the last crash...

Edited by BandWagon

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