Suddenly, the one-bed is big

With rising prices, small flats now greatly appeal to first-time buyers, says Chris Partridge
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The Independent Online

O The humble one-bed flat, long regarded as the last resort for people with neither friends nor money, is in demand, as first-time buyers and buy-to-let investors compete to purchase one.

O The humble one-bed flat, long regarded as the last resort for people with neither friends nor money, is in demand, as first-time buyers and buy-to-let investors compete to purchase one.

The standard advice for first-time buyers used to be not to waste their time on a one-bed flat or studio but to go for a two-bed flat or house. Now prices have risen so high that many first-time buyers cannot afford anything bigger. And rents for one-bed flats have risen considerably faster than the rest of the market, attracting attention from buy-to-let investors.

The competition is thus being focused on a tiny proportion of the housing stock, says Richard Donnell, research director of Savills. "Eight years ago, demand for one-bed flats was low because people could afford to buy two-bed flats or a house," he says. As a result, developers have not been including many smaller units in new blocks.

"I am astounded just how few one-bed and studio flats there are," he says. "In the South-east, there are 67,500 one-bed flats in a total of 3.3 million units - that is about 2 per cent - and the proportion is the same across the country."

The position is acute in London, according to Timothy May of Haart Estate Agency. "Our half-dozen offices in west London are all carrying a stock of about five or six one-bed flats as opposed to the 10 or so they usually have," he says

Although the price difference between a one-bed and a two-bed flat has changed little in relative terms, prices are now so high that the actual amount of money is much more than it was, May points out.

"As prices rise, the gap between a one-bed flat and a two-bed flat or a house is getting bigger so people are not moving as readily."

Buy-to-let investors are also buying one-bed flats because they have been outperforming the market. Yields on one-beds in the UK rose 6.9 per cent in 2004, compared with a 5 per cent rise for two-bed flats and a 2.54 per cent decline for four-bed houses, according to Stephen Ludlow, of Ludlow Thomson.

He says the popularity of one-bed flats with first-time buyers and investors means a complex relationship between sale price and rent has grown up, fuelled by the ease with which landlords and tenants keep in touch with trends via the internet.

"When first-time buyers see prices are too high, they go on the rental market - which puts rents up and sales prices are hit."

The new popularity of one-bed and studio flats has induced developers to increase production. At Redrow's development on the canal in central Birmingham, Jupiter, the number of small flats was increased substantially after the original planning permission was obtained, says Julia Pallister, sales director of Redrow Midlands.

"Forty-four per cent of the apartments will be studio or one-bed, aimed at young and single people."

The Birmingham new homes market has split in two, Pallister explains, with low-price units selling fast and more expensive properties holding fire.

In London, developer Ballymore's Ontario Tower, at Canary Wharf, is 70 per cent small units. Andrew Covill, head of sales and marketing at Ballymore, says: "There has certainly been a shift in our purchasers' requirements, with buyers moving away from the previously popular two-bedroom/two-bathroom apartment types and choosing studios and one-bedroom properties."

Ballymore: 07000 701701

Redrow: 08456 760500

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