Buy to Let Landlords Avoid New Builds

The recent report made by Ludlow Thompson, London-based estate and letting agents, the vast majority of UK buy to let investors avoid newly build properties when it comes to doing business even though most buy to let landlords are optimistic about the prospects of the UK housing market.
The research carried out by Ludlow Thompson showed that a mere 12% of buy to let investors who are willing to expand their property portfolios in the coming months are interested in new build flats and houses. The figure double dipped from that registered in March 2009, when 26% of buy to let landlords looked to purchase new build properties.
In the opinion of estate and letting agents, the trend can be explained by oversupply of new build flats, which were constructed by developers prior to the economic downturn and remained unsold. Some of the developers managed to find bulk purchasers who agreed to buy blocks of flats, given that developers provide them with big discounts on already reduced property prices. This way, bulk purchasers acquired a large number of flats at exceptionally low prices, which fact allowed them to set record low rent rates and still make a profit.
According to Mr. Ludlow, company’s director, this perfectly explains the reluctance of buy to let landlords to invest their money in flats – the rent rates set by bulk purchasers can hardly be beaten, which means that profit can barely be gained. Flats are oftentimes constructed in huge blocks, and most of the time they are similar to one another, which makes buy to let landlords compete with each other in terms on rent rates if they want to avoid vacancies.
Moreover, said Mr. Ludlow, new build flats, which generally cost more that “second-hand” ones, lose their attractiveness fast, just as cars do, and this is another factor that makes buy to let investors avoid new builds.
Ludlow Thompson’s research showed that Leeds, Nottingham and Manchester are the cities that currently suffer the most from oversupply of new build flats.