Investment may not be safe as houses
31 August, 2017 — By John Gulliver
A section of the empty building in Vicars Road
WHY is the new eight-storey block of flats in Vicars Road, Gospel Oak, standing empty?
Built for private sale as part of the council’s Community Investment Programme, the spacious flats in this well-designed block went on the market in April – and yet by early August not one had been sold.
Too pricey? Wrong location?
The answers are puzzling.
Is the council asking too much, just over £500,000, for a one-bedroom flat?
Apart from a downturn in the property market – driven partly by the new stamp duty introduced last year – a Camden estate agent wondered why anyone would pay half-a-million on a one-bedroom flat on the edge of a sprawling council estate when they can buy a similar ex-council flat for £350,000 or less?
A statement from the council’s press office said the new block is part of the Community Investment Programme with proceeds from the sale of flats “helping to pay for new council homes on the estate”.
Seven of the flats are “under offer” with another eight on the market – a further six are not yet on the market. Prices range from £505,000 and £520,000 for a one-bedroom and between £650,000 and £740,000 for a two-bedroom flat.
Government bodies – local authorities or the NHS – enter the private market at their peril, often blundering about in a messy profit-driven market and ending up with heavy losses.
Presumably, the market price for the flats in Gospel Oak were largely determined by building costs but did the council overestimate demand – especially for property in areas with limited appeal for new owners?
Though the property bubble hasn’t burst, overseas investors – from Russia and the Far East – seem to be fewer in number compared to a couple of years ago. The new block in Parkway, Camden Town, for instance, would have been sold off a long time ago, probably off-plan well before completion, instead of which the empty flats remain dark at night.
Has the council got enough rich reserves to hang on to the empty block in Gospel Oak as an investment or will it be forced to lower its prices – and, if so, how will that affect its calculations on profit margins that helped sway councillors to support the Community Investment Programme?