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  • Property-a-holics

    Opinion: Houses becoming an endangered species!

    I've always been a big fan of houses for investment as opposed to flats (outside of London).

    Back in 2009, I wrote 10 reasons to buy a house rather than a flat.

    I am even more convinced that houses are going to be a endangered species in the years to come - and with scarcity comes value.`

    Here are my reasons:

    The chart below is from the latest quarterly report from the NHBC.

    It shows the the building of flats has out-numbered all types of houses over a sustained period.

    The poor bungalow is definitely on life support.

    The chart shows the rise of the flat and the decline of the house in terms of numbers built over a sustained period:

    [Image: 22273891654_650439b082.jpg]

    This table shows the long term trend of house building in decline as flat/apartment building becomes more prolific:

    [Image: 22274000594_cae62a616f.jpg]

    We can see houses rallying in recent years, but it's too little, too late imho.

    My other reasons for thinking that houses are going to be in short supply in the future:

    >The housing shortage is only going to encourage developers to create more and more flats.

    >Institutional investors coming into the PRS will be building on a big scale, and again, flats will most likely be their preferred property type as they can manage blocks more effectively.

    >Permitted development rights encourage the change of use of office and commercial buildings into flats in city centres.

    >Councils are keen on high density flats as they can extract more council tax, therefore this might influence planning decisions. They also need to solving the housing shortage on a local level.

    >Developers are turning big houses into flats to increase the GDV, especially in London.

    (Flats comprise just over half of London’s accommodation and a substantial proportion of this has come from the sub-division of larger houses, in addition to the rise in new apartment developments in central London).

    Conclusion:

    With scarcity, comes value. Therefore it is my belief that houses are going to capital appreciate faster than flats and also enjoy higher rents over the long-term.

    Families need houses, not flats to live in and this puts houses at a premium imho.

    Combine houses on the coast run as holiday lets (not affected by the recent tax changes) and I see opportunity!

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    Great post Vanessa, thanks for doing that research!

    I agree with your conclusions in principle but I think the strength to which they are correct is really dependant on how the PRS develops in coming years. If big institutions come into the market and build large scale tower blocks of flats to provide more efficient rental stock than I think you are right houses, in particular period properties, could become very scarce and valuable especially closer to big city centres. In fact if this happens a housing gap could develop in 15-20 years where young couples who rented these newly built flats now want to buy a family house of which the stock has not been replenished anywhere near the rate at which new flats had been built. Does this make sense? I guess demographic trends impact on this too in terms of couples potbetially having less children in the future and living standards change to where people are content to live in less space.

    Also a point I hadn't considered was the rate at which houses are currently being redesigned into flats. I had stated in a previous thread that the supply of period houses was stagnent but in this context the supply is actually decreasing. Pretty cool thread, I'd like to hear other people's opinions on this
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    I agree Vanessa. I am at the stage where I am now selling some of my rented properties to pay off my loans and keeping others to fund my later years. I am NOT selling houses.

    I have found that the capital appreciation on my houses has way out striped my flats, in the same area.

    Services charges increase all the time but do not represent value for money. I spend so much time arguing with Management companies to get repairs carried out and questioning their fees. I see historic disrepair because of poor management/workmanship and it frustrates me that I cannot just get the work done myself.


    I favour small unfurnished houses (one and two bedrooms) in very good areas, close to amenities and transport. I do not get the best ROI on these but I get far less turnover and work, a good choice of tenants on whom I can get RGI (I won't let to a new tenant without it any more) and my bottom line is excellent when I factor in the lack of damage/losses and turnover.

    I am holding some of my flats because I've got good long term tenants (some for over 20 years) and they make up for the hassle and cost of service charges/Management Companies.

    The odd thing is that I bought many of my houses for capital growth and thought that I would sell them first. We all learn and we cannot buy time.
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    Follow me on Twitter @landlordtweets
    (09-11-2015 06:12 PM)Mary Latham Wrote:  I agree Vanessa. I am at the stage where I am now selling some of my rented properties to pay off my loans and keeping others to fund my later years. I am NOT selling houses.

    I have found that the capital appreciation on my houses has way out striped my flats, in the same area.

    Services charges increase all the time but do not represent value for money. I spend so much time arguing with Management companies to get repairs carried out and questioning their fees. I see historic disrepair because of poor management/workmanship and it frustrates me that I cannot just get the work done myself.


    I favour small unfurnished houses (one and two bedrooms) in very good areas, close to amenities and transport. I do not get the best ROI on these but I get far less turnover and work, a good choice of tenants on whom I can get RGI (I won't let to a new tenant without it any more) and my bottom line is excellent when I factor in the lack of damage/losses and turnover.

    I am holding some of my flats because I've got good long term tenants (some for over 20 years) and they make up for the hassle and cost of service charges/Management Companies.

    The odd thing is that I bought many of my houses for capital growth and thought that I would sell them first. We all learn and we cannot buy time.

    Mary, your book I recently read and thought it was excellent well balanced and made sobering reading
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    I agree in theory in London.

    In my own little area both Bradford and Leeds - overbuilt flats, they sat unoccupied and landlords buying them up ended up renting premium new build flats to LHA tenants due to lack of demand... Once you start with the first few LHA Tenants, the rest of properties in the block tend to turn that way.

    I don't think builders will continue that trend up north, they have built flats and had to cut there profits to sell them on at discounts. Us northerners like houses.

    I think Southerns do too, but its out of necessity in some cases rather than desire.

    I don't like flats, I don't like management companies, don't like service charges, don't like landlords as neighbors, don't like the parking, don't like that kids can not go out, don't like kids unattended in high occupancy corridors, don't like leasehold or rebuying and don't like noisey neighbors above/below/front/back/side everywhere!

    You may be right Vanessa - Houses becoming an endangered species! down south.
    I hope that Flats are becoming an endangered species elsewhere.

    As my geography teacher taught us, on the edge of Bradford. People start building up due to value and scarcity of land. There is no place other than London where that is apparent and need for flats.
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    "I don't like flats, I don't like management companies, don't like service charges, don't like landlords as neighbors, don't like the parking, don't like that kids can not go out, don't like kids unattended in high occupancy corridors, don't like leasehold or rebuying and don't like noisey neighbors above/below/front/back/side everywhere!"
    "Us northerners like houses"


    Top post mate.
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    May I totally concur with what Mary and Adam have stated about flats and houses
    I wish I could convert my four flats into houses
    It would then save me £8000 a year in service charges and ground rents!!!!!!!!!!!!!!!!!!!!
    As investments flats are useless
    The charges severely eat into positive yields
    A good house with the possibility of extending is and always will be a better investment
    I resent being suckered into buying flats
    I'm a house man every day of the week
    Can you imagine that over the next 10 years even if service charges remain the same I will have paid £80000!!!!!!!!!!!!!!!!!!!!!!!
    Just for having flats in a building which requires no work at all
    They do cut the grass occasionally!!!!!!!
    NEVER again will I buy a flat!!!!
    LONDON centre living flats are really the only game in town
    FTB may go for flats as they are usually cheaper
    Service charges are a big consideration though

    Based on my bitter experiences houses are the thing to go for
    I have a house in Southend which I will have to spend about £2000 on shortly
    I don't expect to spend hardly anything on it for the next 10 years!!!
    Unlike the £20000 per flat I will be FORCED to pay
    I must confess I didn't really understand the true effects of these charges on viability
    Given my time again there is no way I would have bought the flats
    Many of which now have HB dross in them
    That would normally occur if you have the right sort of house in the right sort of area
    If you value your bank account avoid buying flats!!!
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    I am two faced. I love my houses and I love my flats. The one I love more though is the one which has made me the most money. Sometimes when I compare the stats its the houses sometimes its the flats.

    All the known variables over time even themselves out. If they dont then why didnt our DD pick up on this before we bought. Service charges don't suddenly leap out of the closet after the first quarter of ownership. I don't stand there looking at the invoice on the doormat and at that point say....

    Ah sussed it.. There`s the catch the cheeky little buggers. If only I had known about service charges I wouldn't have bought it, I`ve been swindled. Lets call trading standards love surely someone should have told us this before we exchanged contracts. No wonder we paid 20% less than that equivalent house around the corner . Now I understand why .That`s well out of order. Someone will have to pay for this mistake and it aint going to be me......

    No . It should be me. I shouldnt pass the buck. The variable which is more likely to determine whether flats or houses has been the best investment is me. That what seems to vary the most . Did I buy well at the time. Be that on price, location, condition, tenant demand etc. Why didn't i do my sums before buying and do a 20 year forecast on price growth and also research into management companies and onerous restrictive clausea in the lease before buying. Yes if my flats have not performed as well as my houses then in the majority of cases that's down to me I`m afraid

    There are positive and negative in investing in flats and positive and negatives in investing in houses. They are what they are at the outset. They are both just bricks and mortar at the end of the day. I have no favoritism in my portfolio

    Some of my clients actively by flats not houses. They have read PT. They ask me the subtle differences. They understand the pros and cons. They go in with their eyes wide open. They make their decision and go for the ones they think make them the most money. They do their DD. They do their growth forecasts. They factor in service charges etc etc . If its the flat they think that wins out after all that DD they wont then simply not buy it on the sole basis its a flat not a house.

    If they did, that would be mindless bricks and mortar discrimination in my view . I`m sorry but i wont be involved in that kind of discriminatory investment attitude.. I`m sure that is in fact illegal

    And yes I would call in the property police :-)


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    Jonathan Clarke. http://www.buytoletmk.com


    I agree Vanessa - and would highlight to members this post from progressive property
    views from mark hormer
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    Over a third of my Investments are in Houses
    They are far far better than flats
    I will only buy houses now
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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    (taking the bungalow tangent) RE "The poor bungalow is definitely on life support."

    I would imagine pretty much all bungalows being built are either self-builds or within care home complexes. I would also imagine that the majority of new self-builds are in retirement areas.

    With an ageing population I do wonder if this is the smart investment - although, I must admit, I can't walk past a bungalow 'for sale' sign without thinking dormer!
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