Q I am purchasing an apartment for investment purposes and cannot decide whether to buy a one bedroom or a two bedroom property. Please can I have your expert advice? Mary Capolla, Harborne
Isabelle Wright comments: Due to the fact that you are purchasing the apartment for investment purposes you will want to make sure that the apartment will let out easily and for a suitable rental figure. In general terms two bedroom apartments will command more rent each month but will of course cost more to purchase. On the other hand some of the new one bedroom apartments in the 'prime' developments will be at a similar price to some two bedroom apartments in areas such as the Jewellery Quarter. The rent however, for these two types of apartment will more than likely be at a similar level. Having spoken to a number of letting agents it is apparent that the demand for one bedroom apartments and two bedroom apartments go through trends. One month it seems that there is a huge demand for one bedroom properties and the next month tenants are asking for two bedroom properties. I would therefore advise that you speak to your chosen letting agent prior to confirming your offer on an apartment in order to ascertain which apartments are currently in demand. It is worth bearing in mind that your most costly period will be at the start of your investment due to the costs involved with purchasing the apartment, furnishing the property, the set-up costs with the letting agent etc, and as such you will want to secure a tenant immediately. If the apartment then experiences seasonal trends you will either have a tenant in place, and the demands will not therefore affect you, or you will be in a better position to withstand the short void period.
Q I bought an apartment about 18 months ago in what I understand is considered to be one the most popular developments in Birmingham. I recently had it valued and was disappointed with the suggested guide price, considering what the statistics show for the UK house market over this period. What are your comments on this? Roy Taylor, London
Isabelle Wright answers: I am asked this question on a regular basis as a result of the increase in house prices over the last year. What I always say to people is that the apartment market in Birmingham is totally different to the house market due to the extensive re-development that has taken place in the city centre and the consequential supply of apartments. The apartments have not been able to increase in price at the same pace due to the large amount of choice available to purchasers and the competition between developments. This is not to say that prices have not increased; many vendors have been able to make a healthy profit from their investment and in general we have seen increases of around seven-ten per cent per annum. Most vendors when purchasing an apartment tend to view the purchase as a long term investment. The capital appreciation may not have been at the same level as some houses in the West Midlands, however the maintenance and rental organisation tends to be a lot easier. Another factor to bear in mind is that the rental demand will more than likely be better for apartments than houses with a strong 'city living' market in place. In terms of re-sale, there are certainly an encouraging number of purchasers currently in the market place and as long as the apartments are priced competitively, they do sell. Many vendors take the view that it is better to achieve a small profit by pricing the apartment realistically, rather than holding out for the 'top' price. With interest rates having been so low in the last year and the struggling stock market, other investment vehicles have not performed well. As such the apartment market has actually been an enticing option.
Isabelle Wright is an apartment sales specialist at the Birmingham office of Knight Frank. If you have a property query you would like her to answer in CityLiving Magazine, email isabelle.wright@ knightfrank.com
