Assetz® News - The affordability options

The affordability options

6th June 2008 |

When it comes to investing in property, there are many different levels of the market. At the top end, there are the millionaire's pads of the prime central London sector and other places where the seriously wealthy gather.

Yet the market is diverse and those investing in property, not least off-plan and new build, may wish to diversify. Affordability has long been a big buzzword in UK housing, particularly since the situation has developed where a significant number of people are unable to get on the housing ladder.

A survey carried out by York University and published this week by property website Hometrack revealed how extensive the problem is, noting that 28 per cent of households aged between 21 and 40 cannot get on the ladder, with the regional variation in the problem peaking in London and the south-west at over 40 per cent but never falling lower than the 17 per cent in the north-east.

While those specifically interested in buy-to-let investment will see these figures as a guide to where - and among which demographic groups - they might find the highest demand, any broader considerations about the property market will focus on how the market in particular locations is dealing with the issue.

One issue which has clearly emerged is that of the rural affordability problem. Compounded in some areas - such as the south-west and national parks - by increased second home buying, it is an issue which clearly needs a solution.

In the Lake District this week, one possible idea - that of groups of people in "honeypot" villages developing their own homes through housing trusts - has been suggested by the national park authority, which is organising a conference to discuss these matters later this month. Andy Lloyd, project officer for the Cumbria Rural Housing Trust, said many villages face an "uncertain future" unless they tackle such issues.

Earlier this week the Joseph Rowntree Trust went further when it stated that in parts of rural Wales affordability is such a problem - with house prices at five times average annual incomes - that "there is a real danger that communities in parts of rural Wales will lose the next generation of young people" unless the matter is tackled.

Some are approaching the matter with an altruistic attitude, as the Royal Institution of Chartered Surveyors' survey of landlords in rural areas showed, with 40 per cent expressing a willingness to sell their land at below market value provided the resulting building provided affordable homes. (Some went further and stated that family, staff, agricultural workers or local people should be given specific priority).

While this may be a guide for some developers in rural areas, there may still be a place for buy-to-let here as well. However, where landlords are looking to find a gap in the market, it could be by pitching their rents at affordable levels and prioritising local residents. But for any who do this, it is important to ensure that the affordability of what they charge does not prevent their own property investment finances from stacking up.