This week I took a call from one of our Landlord's who'd seen an article in the Sunderland Echo featuring a report which claimed homes in the Northeast were some of the smallest in the UK
I looked at the article http://www.sunderlandecho.com/news/business/north-east-homes-are-shrinking-in-size-and-are-among-smallest-in-uk-1-7744492 and it whilst it made interesting reading I wasn't really sure what, if any, impact this revelation would have on the Sunderland property market, either now or in the future
It outlined that at an average 85.4 square meters (sqm), Northeast three bed homes are smaller than the governments guidelines of 93sqm by around 8sqm, and that New Builds in general are about 10sqm smaller than they were in 2003
The first thing to note is that the data just covers New Builds...and anyone who has taken an interest in the Sunderland property market for the past few years will be able to advise that there really aren't too many recent New Build developments in Sunderland
Secondly, when focusing on the rental market, whilst there may have been a few developers who have turned to renting their properties out post-2008 as they couldn't sell them (or wouldn't sell them at a deflated price), educated investors know that new builds rarely stack up as a good medium to long term investments
Sure, you could buy off plan at a "discount" from the developer but how often is this reflective of the true value of the property once completed? The value of a New Build property dips as soon as the development is completed, rising slowly over a number of years to get back to parity with existing housing stock
So the majority of 3 bed rental stock is going to be based on existing properties in Sunderland, just as it is with most of the houses to rent (apartments are another matter altogether)
This may change with the institutions being encouraged to Build to Rent that we discussed in recent blog posts http://www.sunderlandpropertyblog.co.uk/2016/01/here-come-big-institutions-but-what.html
I would argue that the average man or woman on the street couldn't really tell with any accuracy whether a property was a couple of square meters bigger or smaller - they'd know if if felt spacious or pokey, but that's about it...
They certainly wouldn't be able to make comparison with properties elsewhere in the UK and weigh up the relative value based on rents and size...
As I'm a bit of a property geek I have taken the opportunity to do just that!
I calculated that based on the average 85.4sqm of a Sunderland 3 bed property (average rent £585pcm) compared to a similarly sized City in the South East such as Southampton, where the average 3 bed New Build is 93.9sqm with an average rent of £1045pcm, Sunderland rents per square metre are roughly half of those in Southampton, paying £6.85 per square metre compared to £11.85
So Sunderland tenants are paying 56% of the rent compared to Southampton tenants but getting 91% of the property! That settles it then! Everyone in Southampton should move to Sunderland!
Following this rather pointless little diversion it brings me to my final point, that unlike buying the latest flat screen TV or cutting edge carbon fibre road bike, choosing a property to rent or buy is not about specifications or size or £ per sqm, it's about much softer factors too
The thing about houses is that they are as big as they are and they are located where they are!
If you want to live in any particular town or city you really do have a finite number of choices available to you at any given time
I've been on countless viewings when the potential tenant has said, "If only the bedrooms were a bit bigger..." or "It would be perfect for me if it was only in..." Unfortunately such things are beyond our control!
I would also argue that once the basics are covered off, such as enough bedrooms & bathrooms to cope with the number of people staying there - people buying or renting will make decisions which are highly influenced by intangible 'gut reactions' as much as they are square meters and EPC ratings
This got me thinking that even if there is an influx of Build to Rent new build homes in Sunderland (which as I've said before I don't necessarily see as a bad thing) it could work in the favour of landlords owning existing older stock...indulge me for a second on this...
My logic follows that if potential renters are put off by the small size of the New Builds they could reevaluate older housing stock in a more positive light and look to them in order to get more space!
Given New Builds are likely to be offered at a premium rent, if a Landlord has an older property with the same number of bedrooms but offers significantly bigger accommodation (presented to a comparable standard as a New Build) could they perhaps look to price it accordingly? Could this lead to higher rents for high quality older housing stock?
Do you agree? If you would like to chat about any aspect of the Sunderland property market call me on 0191 567 8577 or email firstname.lastname@example.org