Assetz® News - Wiser urban investment

Wiser urban investment

18th June 2008 |

For those buying investment property, wherever it may be, one major issue is to ensure that the purchase made reflects the needs of the local market, be it an off-plan development, a buy-to-let property or a commercial property move.

Recently, those buying in provincial cities have found that the apartment sector has been a major problem area, with a saturation seeing prices drop and many flats remaining unsold. This problem was revealed even by the one recent housing survey to show a price rise, the Department for Communities and Local Government figures for April, which indicated a 1.3 per cent rise in terraces and a 0.8 per cent increase for detached and semi detached homes, but a 0.3 per cent fall for flats.

The problem was also mentioned by the urban research body the Centre for Cities, which used its new report entitled "The Future of the Private Rented Sector" to call for more homes in cities to be built specifically for the rental market. The body said that one area which needed improving was the communication between local authorities, planners and investors, with the situation in Leeds at present where 30 per cent of city centre apartments stand idle cited as a clear example of what can go wrong when this kind of consultation does not happen.

For investors, the best approach will always be to investigate which areas of the market have the highest demand, rather than following fashion as some who have unwisely bought apartments may have done. But in turn, this requires the developers to provide those opportunities.

Today, a new development in the heart of Leeds was announced by Reland, which is to turn a three hectare brownfield site off Hunslet Road on the southern fringes of the city centre into a mixed-use project, which will combine employment opportunities with retail outlets, bars and entertainment facilities, public amenities and of course homes. Some might hope that the 707 new dwellings would follow a different pattern, being modern family dwellings despite their proximity to the heart of the city. Such designs exist, such as the New Islington project in east Manchester that will offer an alternative to the new-build apartment blocks nearby.

A glance at the artists impression in the Yorkshire Post gives the impression that this will be another major apartment development, but Charkles Calvert of Knight Frank, one of the agents acting for Reland in Leeds, suggested otherwise, saying: "The proposed scheme represents a true mixed use urban regeneration scheme which will provide for a far broader section of the community within a much enhanced environment than has been the case with many developments in the city to date."

If this may raise hopes that investors could have better bets in the Reland scheme than other recent projects in Leeds, fingers may also be crossed over a new development in Portsmouth. Fresh from winning the FA Cup, the city's football club has announced plans to move from its cramped Fratton Park stadium near the city centre to a modern and larger stadium near two motorway junctions overlooking the harbour. In the meantime Fratton Park is due to be bulldozed and replaced with a mixed-use development which includes 750 new homes.

Whether the new homes will be the sort that meets local demand will again be an important question. However, Portsmouth may be a special case. As well as being the only island city in Britain (most of it is on Portsea Island, which is separated from the mainland by a narrow channel), it has the highest population density of any city in the UK outside London, according to the Government Offices for the English Regions. Therefore the need to squeeze in as many dwellings of whatever kind may be higher than in a place such as Leeds. Whatever does transpire, investors will need to look carefully at whether the new homes represent properties that will pay in the long run.