City centre newbuilds plummet at auction

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by Gill Montia

An oversupply of city centre apartments and shortage of tenants looking for such accommodation has led to gloomy predictions for the buy-to-let sector.

Many such developments attracted small investors who were inexperienced and encouraged by the slick marketing practices of some developers.

So far, Ipswich lays claim to the worst recorded loss for such a dwelling. Apartment 502 in a new-build luxury development on Anchor Street was sold in June 2006 for £268,000.

At the end of last year, it was auctioned as a repossessed property, achieving a price of £133,000.

Total outstanding UK buy-to-let debt is estimated to be around £122 billion and while investors are optimistic that rental yields will improve as the residential property market slows, the problem of the untenanted buy-to-let newbuild flat remains.

David Sandeman of Essential Information Group, which compiles property auction data from across the UK explains: “There has been a very bull market and a lot of dinner party peer pressure to follow suit and get into buy-to-let … people thought they were going to make some easy money. But the blip has happened very quickly and now a lot of people have found themselves caught in a financial vice.”

According to Mr Sandeman: “Repossessions are rising and we are seeing a sometimes terrifying drop in price at the subsequent auctions.”

Alan Ward, of the Residential Landlords Association, has little comfort to offer the newbuild city centre apartment investor, suggesting: “Some buyers would have been better off investing in Northern Rock.”