Brokers warned to tread carefully regarding microhomes

Mortgage brokers have advised to use caution when providing advice on microhomes, due to limited potential for resale.

Which?, the consumer group, carried out an analysis of the Land Registry figures, which indicate that around 8,000 micro-homes were built in 2016, as developers were encouraged by the flexible planning regulations. These homes have increased in popularity in Central London and other areas where costs are being inflated due to the shortage of affordable properties. Due to this type of property being so unique, there are potential risks for brokers who are advising their clients.

Micro-homes are smaller than the standard size of a studio property, typically 37sqm. This may mean that they are unsuitable for buyers who are considering starting a family in the near future, and may be difficult to obtain a mortgage for. Although brokers are unable to offer advice on the appreciation of a home, they can say that there is evidence that shows that microhomes appreciate far more slowly than other properties.

Future buyers of the property may also find it difficult to secure a mortgage on the property, due to limited salability. Some lenders have criteria referring to the size of the property, with 30sqm being a minimum in some cases. However, other lenders will rely on the valuation report, and if sufficient demand is demonstrated in the area, they may consider a loan.

CeMAP training courses aim to help mortgage advisors to learn about the various risks surrounding unique properties, including micro-homes.



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