WITH £675m being invested in the St David’s 2 project, Cardiff is on the verge of a new beginning. But as new buildings begin to sprout up in the capital, JAMES MCCARTHY investigates whether a property crash is on the way...
THEY are the empty properties that everybody wants – but few young professionals can afford.
With a range of studio and luxury apartments springing up across Cardiff, now has never been a better time for inner city living.
Yet, hundreds of posh flats worth millions of pounds are lying empty in Cardiff Bay because property investors can’t make the quick profits they want.
And with warnings of a sales slump appearing on the horizon, hundreds more sellers are having to offer their homes for sale for much less than they’d hoped.
Meanwhile, both are finding themselves undercut by developers selling brand new properties – which are continuing to shoot up around the waterside and the rest of the capital’s centre.
But with thousands of fashionable apartments springing up on the back of easy money, many fear a crash could soon be on the way.
And it is a situation that’s not confined to Cardiff – with similar property gaps emerging in rival British towns and cities such as Manchester, Leeds, Newcastle, Bristol, Nottingham and Swindon.
Michael Jones, former president of the National Association of Estate Agents, runs Michael Jones and Co estate agents in Cardiff.
He said: “In areas where there has been mass development, like Cardiff Bay, sellers will be struggling because there really are just too many flats.
“Speculators have bought them and they are now having trouble selling them, so they put them on the rental market, which becomes saturated.
“As that happens the type of tenants you can take on becomes limited and they become less desirable. And then it is a slippery slope.
“Once less desirable tenants get into an area the area declines, the property declines and it is difficult to get back from that. Once properties get the reputation of being difficult to sell or let that is the start of the decline.”
The situation is no more true than on Lloyd George Avenue – the main tree-lined boulevard which links the Bay to the city.
Five years ago, the area was one of the hottest places to live as flats sprung up along the avenue, dividing the area from its poor neighbour Butetown.
With duplex apartments stretching from the top of the avenue right down to the Wales Millennium Centre, the street was regarded as one of the places to live.
But today, with scores of luxury flats springing up close to the National Assembly and in the Water Quarter area of Atlantic Wharf, many landlords and private owners are struggling to sell their Lloyd George Avenue properties as they compete with those offered for sale at rival developments.
And with mortgage rates rising, it’s feared investors of Cardiff’s brand spanking new developments could soon start to feel the pinch too.
An estimated 40,000 one and two-bedroom flats in city centres, in complexes of 25 flats or more, have been built in Britain since 2000. Of these, 70 to 90 per cent have been bought by investors, rather than owner-occupiers.
Mr Jones said: “When an area is bought by investors – I know of a number of investors who have bought £20m and £40m worth of properties – there is no community. Then it quickly starts to look shabby and uncared for.
“A lot of people bought to make a quick killing but they are struggling to get that. They have overdone it. Quite honestly there are far too many flats.
“I have heard of people having paid £190,000 for a flat and are having trouble getting £150,000 back.”
The number of properties for sale or rent has never been clearer.
A quick glance at property sites such as rightmove.co.uk and torent.co.uk show there is plenty of choice for the prospective buyer or tenant with penthouses available to rent from £1,800 a month down to studios from £350.
None of this is helped by what looks like the beginning of a slump in the property market.
Latest Land Registry figures for Wales show the price of an average home has fallen slightly from £141,191 to £140,611, a drop of 0.4 per cent, though prices are still higher than last year. The average in August 2006 was £132,017 compared with £140,611 this August, an increase of six per cent.
Last week, a flurry of warnings about new-build properties emerged from lenders, valuers and even developers. UCB Home Loans, part of Nationwide Building society, stopped lending altogether to landlords buying new flats. Building firm Barratt attributed a “five to 10 per cent fall” in sales to the Northern Rock debacle. Surveyors and agents across the country reported an increase in incentives – effectively price-cutting – being used by developers to shift new, inner-city flats.
Cardiff’s CPS Homes specialises in properties in the Bay.
Sales manager Toby Woods is trying to tackle the problems ahead.
He said: “The market has become a bit hesitant. The builders have profit margins to undercut the second-hand prices.
“So the new ones are selling cheaper and they are discounted, so that has a ripple effect when it comes to the second-hand market. Properties are still selling but they have to be realistically priced.
“It depends on the development too. Atlantic Wharf is still quite popular because it is equidistant between town and the Bay, and Century Wharf is still popular because of the size of the properties.”
Around the city, Cardiff Council is aware of 3,000 properties lying empty.
It is not illegal to leave a property empty but local authorities can appeal for compulsory purchase orders when properties are left vacant.
Judith Woodman, Cardiff City Council’s cabinet member for housing, said: “We have a wasted homes strategy.
“If a property is left vacant for more than six months and is causing a problem we’ll track down the owner and try to get them to bring the property into use.
“But the problem of going down the route of compulsory purchase is it can take a phenomenal amount of time.”
Homeless charity Shelter Cymru are appalled so many empty properties litter the capital.
It believes better use needs to be made of existing housing stock.
Charity policy manager John Pritchard said: “Empty properties are a wasted resource when so many people in Wales are in housing need.
“When properties are empty it is not only a poor use in terms of accommodation, they can attract petty crime and anti-social behaviour like fly-tipping and graffiti, and in some circumstances more serious crime such as vandalism, drug dealing and arson.”
But despite predictions, those who have foreseen housing crashes have been wrong in the past. It seems only time, and investment, will tell.