Letter to the Financial Times about returns to investors in new-build flats

Housebuilders have more to fear from flats' price fall

By Charles Fairhurst

Published: January 25 2007 02:00 | Last updated: January 25 2007 02:00

From Mr Charles Fairhurst.

Sir, The oversupply of new flats (report, January 20) can hardly be a surprise to those that organise buy-to-let syndicates; as they are unregulated, I suspect they are not required to advise their investors of these poor returns. Oversupply of flats is clearly a problem but all new developments have a "stabilisation" period when short-term owners become sellers; what has changed over the past three years is how many of these investors and owner-occupiers have become short-term investors and so the "stabilisation" periods have lengthened.

Housebuilders perhaps have even more to fear from this news; as many have become dependent on buy-to-let syndicates for off-plan sales and both the increase in short-term investors and the oversupply flats of new developments are combining to hold back values. Equally concerning may be that owner-occupiers have become particularly disenchanted with ever smaller flats in far from attractive new developments, built on brownfield land; the government's planning policies are responsible for this but the housebuilders now have to build and sell them.

The good news for long-term investors is that whilst a longer "stabilisation" period has provided very little short term capital uplift, these properties will revert to mean as they become "second hand".

Charles Fairhurst,

Chief Executive,

Fairbridge Residential Investment Management,

London W1U 2RE

Copyright The Financial Times Limited 2007