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Article 4 for HMO - property prices may fall

21st Jun 2012

Category: Local property news

Tagged:Planning, HMOs, property investment, House Prices

You may have seen our recent blog article about Article 4 and its impact on HMO investors in the Nottingham area, if not you can catch up here:

http://www.comfortlettings.co.uk/blog/2012/04/12/a-nottingham-lettings-blog-shall-we-talk-article-4

We focussed on Nottingham in the above blog, but Article 4 Directions have been sweeping across city centres all across the Country - what what will their impact be on house prices?

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If a family home is located in an area where there are a high concentration of HMOs (House of multiple occupation, like student houses) then it is generally understood that families are reluctant to move to such an area.  In the past, such areas have become more dense with HMO type accommodation as a consequence, making the attractiveness to families diminish further.  Thus, investors have generally been the main buyer in such areas.

Article 4 will effectively stop investors from buying family homes in these kind of areas and converting them to HMOs.  Article 4 merely means that the owner needs to ask for planning permission, but it is widely understood that in doing so that most local planning authorities will be refusing the planning permission, because the reason why the Article 4 will have been introduced in the first place will have been because the local council will have felt that there were too many HMOs already, so why give permission for more?

Therefore, in conclusion, if families are reluctant to buy and the investors cannot buy to convert a family home to a HMO which produces a higher yield investment then the prices will naturally fall due to there being a demand issue.  I will look out for evidence of this as time goes on, but anecdotedly, we have advised a number of clients to abort purchases as a consequence of Article 4 and that means potential buyers have been removed from the market - which is only resolved by making the purchase more competitive by lowering the price tag!

There are groups of people, investors and owners alike, who have had enough and started to campaign against Article 4, sign here: ###a href="http://epetitions.direct.gov.uk/petitions/34625" class="redactor-linkify-object">http://comfortlettings.cogwebs...

Phil Ashford

Partner MEng(Hons) FCA MARLA

An experienced Chartered Accountant and a Founding Partner of Comfort Lettings.

Connect with me on Linkedin

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