Abbey deputy chief risk officer Iain Laing believes that flats will be hit hardest in a housing market downturn.
Speaking at last week’s key account conference, Laing said: “We can see one very clear story in that the market for flats, particularly city centre flats, looks disastrous at the moment. We have seen big devaluations and are trying to filter out from that whether that is the whole story in terms of house price falls.
“We think there is a bubble bursting in flats. In the background, you have got loads of people who would love to buy a three-bed semi in the suburbs and we have got a distinct shortage of these houses.”
Laing said the potential for a big downturn in the price of flats is playing a major role in forming Abbey’s lending policy and it has been tightening up on new-build lending.
He said: “We introduced policies in March that followed moves that several lenders took at the end of 2007. This is driven by the experience most lenders have had – big drops in house prices, particularly on newbuild city centre flats.”
“We have trebled the number of flats the UK has been building over the last few years. We have got lots of two-bed flats in city centres but we do not have that many people who want to live in two-bed flats.”