Are New Build Apartments A Good Investment Or Are They About To Crash?

Take a walk through most city centres or riverside areas such as the Thames and you will see numerous tower cranes, most of them being used in the construction of one, two and three bedroom apartments. It begs the question: Are the developers building too many of this type of housing, or is there still a strong demand. In some areas of the country there is simply an oversupply and some proposed developments have been mothballed completely.

Places such as Leeds, Nottingham, Leicester and Ipswich, which have been intensively developed, have now been recognized as only having a modest demand. Prices for these properties largely depend on supply and demand and in areas of oversupply prices are plummeting. Both aspiring and experienced landlords have purchased many apartments as buy to let investments and in areas of oversupply there may be dozens of properties for every potential tenant. This has caused the value of these properties to fall but the mortgage payments remain the same. Rents in areas of over supply have to be reduced to attract tenants and they often do not cover the monthly mortgage repayments meaning that they become an even less attractive prospect to would be investors. Some property investor gurus have been predicting a crash in apartment prices for a few years now so will their predictions come true in 2008?

The question may be answered by simply looking at supply and demand for property in general in the UK. The government estimates that approximately 230,000 new homes are required to be built every year to cope with our growing population, but only 160,000 are actually being built leaving a shortfall over 20 years of over a million homes. People are living longer due to healthier lifestyles and there are a growing number of single people due to our modern lifestyles and values. People are less likely to stay in a difficult relationship these days and are much more likely to opt for a single life for a while. Add to the equation, a shortage of work skills and the requirement for overseas workers to set up residence in the UK and in the long term it seems that there will be a very strong demand for affordable housing.

There seems to be a hiccup in the property market at present, which is due to the lending businesses i.e. banks and building societies who, we are told, facing difficulties in liquidity and are toughening up their lending criteria. In America several banks have gone bankrupt and in the UK Northern Rock has recently been nationalized by the British government. Some lenders are not passing on interest rate cuts to tracker mortgages following cuts to the bank of England base rate due, which they say is due to the current liquidity crisis.

This all makes for interesting times ahead. The general consensus seems to be that in the short term property prices may fall or at least not gain much in 2008 but in the long term supply and demand will cause prices to continue rising.
To save estate agents fees you can sell property privately at http://www.sellmypropertyonline.co.uk for a small fee.

Article Source: http://EzineArticles.com/?expert=Ian_Wagstaff