Report Finds Micro-Home Market Is Getting Bigger

A recent study has claimed that a record number of ‘micro-homes’, some only just larger than a prison cell, were built in the UK in 2016.

The report from Which? found that 8,000 of the miniature properties were built last year. The consumer-interest company even drew attention to a studio apartment in Brent, London, that measured just eight square meters: less than a quarter of the 37 square meter standard set by the government for studios, and tinier than an average UK car parking space.

Unfortunately, these ‘standards’ are not legally binding. It is also relatively simply for developers to create these tiny dwellings: In 2013, the government made it legal for developers to convert offices into residential homes without the need for planning permission.

“In theory, converting offices sounds like a good way of creating some of the homes we need in a crisis,” said a representative for Shelter, a charity campaigning to end homelessness in the UK.  

“But in reality, it’s often used by developers as a way of cashing in on people’s desperation by building unaffordable, rabbit-hutch homes.

“Our homes are already among the smallest in Europe, and if the Government allows developers to cut corners by slashing space standards in homes even more, they will be punishing ordinary families in the process.”

This ‘shrinking’ trend has not gone unnoticed or unchallenged. The MP for Chipping, Lancashire, recently fought plans by developer Meadow Residential to convert Barnet House, an office block, into 250 ‘dog kennel’ sized studio flats.

"Trying to cram so many tiny flats into Barnet House would have many negative consequences for the people moving in there and for my constituents living in the neighbourhood,” said MP Theresa Villiers.

Having said that, many of us would welcome any chance to get on the property ladder, especially if the location is right. Last year, micro-homes in London sold for an average of £279,000, a figure less than half the size of the £580,000 average for normal properties in the capital.

In a case like this you may also argue that, while the flats are tiny, they will still increase in value, allowing buyers to move on for something better within a few years. 

Unfortunately, the Which? report also found that micro-homes do not tend to rise in value as quickly as larger alternatives. According to the study, the average price of a micro-home increased by just 6.9% between 2013 and 2015, while properties offering less than 30 square meters saw a rise of just 5.4%. 

Considering that the national average house price rose by 8.7% over the same period, it would seem as though buyers of micro-homes could be dooming themselves to a much longer wait before they can move up the property ladder.

Which? also pointed out that many lenders, including RBS and Nationwide, will not grant mortgages for properties below a certain size.

“Smaller properties can put lenders off due to concerns around the future value of the investment," says David Blake, principal mortgage adviser at Which? Mortgage Advisers. 

"However, there are mortgage lenders who are receptive to properties of this nature, if demand is high enough and sustainable."

With people showing a clear willingness to buy and move into these properties, especially in urban areas such as London, Liverpool and Bristol, you have to wonder what will come next; perhaps capsule apartments could soon become the norm!