Oversupply in the apartment market is not necessarily a bad thing, claims Assetz…

Those looking for good or bad news about the buy-to-let market should not have to hunt too far to find it in these times of change. But both will not be found in the same place, for different movements in the market, both geographically and in the type of property, have led to variable situations around the country.

One difference frequently noted has been that between the investors hoping to make a quick return - for whom the market is no longer favourable - and the landlords who are in it for the long run, looking to make their money over time and ready to rise and fall with the peaks and troughs in the expectation that the peaks will always bring more gain than any dips will take away.

Another feature of the market, however, has been the rapid appearance on the market of new flats and apartments. This has particularly been true of northern cities such as Manchester, Leeds and Liverpool.

Prices slashed due to oversupply

Many analysts now believe the situation has reached on of oversupply in this segment of the market, with the Liverpool Daily Post recently reporting that this appeared to be the cause of a city centre flat being sold for under half the price it changed hands for in 2004.

This has also been backed by the Royal Institution of Chartered Surveyors, which noted in its December letting survey that "The growth in tenant demand for rental property moderated as demand for flats fell away due to an oversupply in the market."

However, for those looking for portents of doom, this is not one, for this is but one part of the market. While Rics spokesman Jeremy Leaf acknowledged that tighter credit conditions and higher interest rates had "started to hit" the buy-to-let market, there was the other side of the coin: "Many landlords will still take solace from uncertainty in the economy and enjoy the gains from rising rents," he noted.

If there are oversupplies and glitches in parts of the market, there are high-performing areas in other parts of it. This, at least, was the conclusion of the Alliance & Leicester survey of landlords yesterday. London was singled out as being tipped to perform well in 2008 with average rental yields of 44 per cent, compared with ten per cent in the neighbouring south-east.

Overall outlook = positive

One conclusion it may be possible to draw is that London is set to do well while northern cities with too many new flats will not do so well. But besides any local assessments or analysis of any particular kind of property, the overall outlook appears healthy. The Alliance & Leicester poll showed that 77 per cent of landlords were making a profit and 71 per cent said their prospects were either good or very good.

Thus, it seems, the overall outlook for most is indeed a positive one, even if some analysts may wish to concentrate only on the bits of bad news. As a result Jeremy Claridge, head of specialist mortgages as Alliance & Leicester, was able to give a positive assessment of the situation.

He said: "It is encouraging that buy-to-let landlords indicate they are feeling buoyant about the outlook for 2008. Regardless of a tough financial year, it is clear the buy-to-let property market is still healthy for longstanding landlords, especially for those in the south-east of the country."