House prices crashing

[faceless]

£175,000 flat I bought last year is now worth less than £100,000: Owner's negative equity horror
4th July 2008

A property investor who bought a flat for £175,000 at the height of the housing boom has ended up in a negative equity nightmare after its value nosedived by almost 50 per cent. Maurice Conroy, who owns a string of buy-to-let flats, bought the studio in central London last summer. But he has just had it valued by three agents who told him it would now only sell for between £80,000 and £100,000.

He is one of a growing number of buy-to-let investors who are discovering the property market is not, after all, a safe alternative to a pension. Mr Conroy, 43, from Chelsea, admits he paid over the odds for the flat a year ago, but said the news left him reeling. 'It's like being hit in the stomach,' he said. 'It's the biggest drop I've heard of and I scan all the property news. A £95,000 drop - that's 50 per cent. Even if it sold for £100,000 that's 40 per cent. I questioned the agents and they said they cannot value it at more than £1,000 a foot.'

Two agents valued the flat in Pimlico at £100,000, while Hamptons International said it was worth no more than £80,000. The property, in a Regency stucco-fronted terrace, is 120 square feet - the size of a small double bedroom. It has a separate bathroom, a kitchen area and room for a sofa bed.

Mr Conroy and partner Caroline Faulkner secured it after a bidding war last August. Its original asking price had been £150,000. 'Two bids came in at £160,000 and because we wanted it we decided to go for £175,000,' he said. 'At that time it only meant an extra £20 or £30 a month on a mortgage. I had it valued soon after and was told it could make £225,000.'

Sean Williams, assistant manager of Hamptons in Pimlico, said Mr Conroy had been a victim of last year's overheated market. 'I think they paid over the odds by a factor of three,' he said. 'Things got rather silly last year. I am amazed there were even bidding wars going on for that property at that sort of level.'

Mr Conroy has now decided to keep the flat, but with sales down by as much as 70 per cent since Christmas, landlords whose rental income does not cover the mortgage are in a serious financial trap. Ed Stansfield of Capital Economics said: 'Fears that the housing market would be flooded with former buy-to-let properties as landlords scrambled for the exit have, so far, been misplaced. The uncertainty generated by house price falls and the sharp reduction in mortgage credit availability has actually boosted demand for rented homes by frustrated first-time buyers. Property prices may be falling, but letting conditions are improving - rents are rising, property is letting faster and most landlords have decided to sit tight. But the further prices fall, the more likely it is landlords will sell up, or cut the number of properties they own. And if the recession damages demand from corporate tenants - an important part of the London rental market - it will increase stresses in buy-to-let.'

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People like this are far more damaging to the economy than all the 'scrounging dole-scum' put together.

[luke]

loving the simpson character

i remember reading the figures for government spending once - all the so called 'scrounging dole-scum' were a tiny tiny percent of spending - and yet people bitch about that tiny percent so much

[Skylace]

Dems the breaks. It's not like you couldn't see the housing market crash coming. So I can't feel bad for him at all.

[major.tom]

I was blown over when I got to the size of this "flat". It's so small, it's practically one-dimensional.

Any prat who would spend 175,000 pounds for a shoebox ought to draw a lesson from his experience. I wonder how much he would be willing to pay for a phone booth.

[Mandy]

No sympathies here .. he (and speculators like him) forced the price of the flat to such levels that ordinary (non-speculative) buyers were priced out of the market.

He paid £1,458 per sq foot in PIMLICO .. is he crazy ? I don't think even Mayfair prices are at that level.

[luke]

i wonder what he's charging for rent ...

* edit - i've just had a look on one of the property sites - average price for a studio flat in pimlico ( sw1 ) is ... £1,530!!

[Skylace]

[Mandy]

[major.tom]

As Luke alluded to, flat prices are a very good reason to relocate (hint hint faceless). I pay $485 CDN for a 2 bedroom apartment. It's not spacious, but big enough to contain my clutter.

Housing prices are getting expensive here for a town so small (~15-20,000 people if you count the surrounding boroughs). Decent ones start around $200,000, but you can pay less for 800 sq ft cottages or don't mind the unfashionable side of town.

[luke]

[major.tom]

[11antoniacourt]

Any investing is about risk. and how much of it you can take. Considering his age, economic and real estate cycles, etc., by the time he's 53 he'll be fine. He took quite a risk overpaying to begin with poor bastard.

[SpursFan1902]

No heating costs here in Sunny Florida, but cooling the inside is just as expensive. Our market is crap here too. Since I haven't had to pay rent in about 4 years I am not sure what the going rate is, but my last apartment (I moved out in Oct 2004) I was paying $785 per mo rent (2 bedroom - 1185 square feet) and if memory serves about $60 (ish) for eletricity (we don't have gas here) and $60 (again ish) for water/sewage. I was able to afford it ok on my salary, but after I left my job, it would have been quite a different story.