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The New Housing Equilibrium....

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Looking ahead the new house price equilibrium that 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 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, anyone who has sold a flat in the last 2 years has definitely made a good move.

There are so many new flats available to buy in most areas. 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 family homes 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. People seem to believe 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.

Edited by fdk

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