Monday, July 31, 2006
Too Many Posh Flats?
Every day there are stories in the US property press about what is going to happen when the property price bubble bursts. On the whole I don’t find them very interesting, but perhaps this one reported by First Rung is different. First Rung’s analysis implies that parallels can be drawn with the UK housing market. Its suggestion that half of all private rented properties are empty at any one time is incorrect. There are approximately 2.3 million private rented homes in England and only 700,000 empty homes. Nevertheless their theory that new homes are remaining empty because they are being marketed at unrealistically high prices may have a ring of truth. Anecdotes about new city centre developments such as prestige flats in Birmingham, Manchester and new waterside developments in London remaining unsold are becoming more common. The theory is that dropping prices to a level at which they will sell easily will put them into the reach of people who may tarnish the “upmarket” image of these developments. The owners consider it better to leave them empty and hold out for high prices. I’ve never seen any research on this theory, but surely like all devices that try to buck the market this is ultimately doomed to failure. Better surely to accept that their target market is over-catered-for and remarket to a different group of buyers.