Price Of New Build Flats 'set To Crash'

[Landagan]

The price of new build flats are heading for a "full scale crash", causing misery for tens of thousands of buy-to-let landlords who gambled on an ongoing property boom, writes Paul Farrow

http://www.telegraph.co.uk/money/main.jhtm...raffdrv07053100

In Manchester, a repossessed flat bought for £178,000 in 2004, was recently offered at a London auction with a guide price of just £80,000. At a similar Manchester development, City South, one new flat was bought from the developer in 2001 for a just under £140,000 - it was sold a few months ago for just £87,970.

Set to crash?

In my mind a 50+% drop is a full blown crash!

[Ursus]

Set to crash at current 50% value, still crashing at now -50% 04 value and still sinking?

80k less a further 50%, a 40k flat. Sounds almost reasonable for a FTB on minimum burger flipping duty. Then can aspire to further themselves.

[The Ayatollah Buggeri]

Jonathan Cornell of Hamptons International suggests that investors struggling to find tenants should reduce the rent and top it up themselves - if they can. "Selling is the most painful option. If you can afford pounds 100 month yourself, it might help you get a tenant. It will also buy you time - in 18 months it will be a more relaxed environment to sell in.''

Wishful thinking or what?!

[JohnG]

The price of new build flats are heading for a "full scale crash", causing misery for tens of thousands of buy-to-let landlords who gambled on an ongoing property boom, writes Paul Farrow

http://www.telegraph.co.uk/money/main.jhtm...raffdrv07053100

In Manchester, a repossessed flat bought for £178,000 in 2004, was recently offered at a London auction with a guide price of just £80,000. At a similar Manchester development, City South, one new flat was bought from the developer in 2001 for a just under £140,000 - it was sold a few months ago for just £87,970.

Set to crash?

In my mind a 50+% drop is a full blown crash!

Exactly.

This has been going on for around 3 years. Somebody please buy the dopey fegger a Tardis.

See umpteen threads on this forum.

Typical example. Nottingham Weekday Cross. LR sale price 3 years ago £190,000, now fetching £120,000 (auction repos(?))

[Guest Bart of Darkness]

Somebody please buy the dopey fegger a Tardis.

You can buy a TARDIS here.

As we're talking luxury shoeboxes, I'd suggest the half size version.

[StringerBell]

80k less a further 50%, a 40k flat. Sounds almost reasonable for a FTB on minimum burger flipping duty. Then can aspire to further themselves.

It wasn't that long ago that someone working in McDonalds could afford to buy in many Northern cities.

In the crapper areas, mind but given the average earnings in many places those days will certainly return.

[ScaredEitherWay]

As much as I'd love to help out a BTL landlord and rent their shiny flats, I'm afraid I can't afford them.

When you're single, living alone and taking home £1,000 - like many, many of us are, it's just not possible. You have to rent older properties with lower rents.

For me, renting a new build studio/bedsit would cost about 50% of my take-home, as opposed to 35% I am paying on a nice/clean studio that is 25 years old. Even the fact that with the increased rent it would all be newer and larger, I can't afford to be tempted.

They'd have to drop the rents a bit more than £100 to get people moving in in big enough numbers to make a difference.

As has been said 1000 times before: where ARE all these "young professionals" expected to be magicked up from that are supposed to live in these places...?

Edited February 22, 2008 by ScaredEitherWay

[Timm]

It wasn't that long ago that someone working in McDonalds could afford to buy in many Northern cities.

In the crapper areas, mind but given the average earnings in many places those days will certainly return.

Mmmm.

It's worth remembering that when the "demand exceeds supply" argument was trotted out, it included

households supported by the minimum wage. The question is, in 18 months, will these households wish

to buy a new-build, inner city flat?

[StringerBell]

Mmmm.

It's worth remembering that when the "demand exceeds supply" argument was trotted out, it included

households supported by the minimum wage. The question is, in 18 months, will these households wish

to buy a new-build, inner city flat?

Outside of Central London no one wants to live in a tower block.

The low paid workers will be buying cheap terraces just as they've always done. That'll leave the new build tower blocks pretty ******ed.

[crash2006]

Two trends:

+ UK property prices are falling, and the slide will pick up pace, as all that BTL malinvestment begins to get liquidated

+ Younger folk will progress, getting higher paying jobs, and building their savings. Through this, the price of property they can sensibly afford will gradually rise.

A falling line, and a rising line, will eventually cross. But that day is still 2-3 years away IMHO.

Can't you see it now?? All those crazy BTL speculators were actually your friends. They created excess supply, that will drive the marlet LOWER than it would have gone without them. Within 2-3 years you may be in a position to take advantage. Then you will thank them for the mad excess that they help to create.

"Bless those mad BTL-ers."

but thats the whole point short term loss long term gain

short term gain long term loss.

Edited February 22, 2008 by crash2006

[Guest Charlie The Tramp]

New build flats = Leasehold

I would never buy Leasehold.

Bought a 2 bed maisonette in 1970 on a 97 year L/H with a fixed GR of £10 per annum with no other charges.

Today I can`t believe what people are paying.

[Guest Mr Parry]

Two trends:

+ UK property prices are falling, and the slide will pick up pace, as all that BTL malinvestment begins to get liquidated

+ Younger folk will progress, getting higher paying jobs, and building their savings. Through this, the price of property they can sensibly afford will gradually rise.

A falling line, and a rising line, will eventually cross. But that day is still 2-3 years away IMHO.

Can't you see it now?? All those crazy BTL speculators were actually your friends. They created excess supply, that will drive the marlet LOWER than it would have gone without them. Within 2-3 years you may be in a position to take advantage. Then you will thank them for the mad excess that they help to create.

"Bless those mad BTL-ers."

Younger folk may be getting older, wiser, more experienced . . . this does not mean the higher paid jobs will be available. Everything including Dr. Bubb and Mr. Parry are moving East.

Also consider the demographics. The age group to which you refer, well, there isn't that many of them. Also, consider wage inflation versus CPI.

[Red Baron]

Most bears here will recognise just what an appalling investment new-build flats are likely to be now that property prices are on the slide. In the last crash I remember flats in Cambridge, which had been bought for £80-90K in the late 1980s, struggling to sell for half that sum a few years later.

It will be infinitely worse this time because of the sheer scale of flat building in every major town and city in the UK; the country is simply flooded with the stuff. I looked at flats in Bedford, part of a new 'upmarket' development scheduled for completion Q4 2008. These were all sold 'off plan' in Q1 2007 to BTLs when building commenced and I was appalled to see how small they are - 6-700 square feet, yet the developer asked close to £200K for these dog boxes. Those same buyers are now panicking because they will be forced to complete later this year in a falling market with no prospect whatever of covering the mortgage costs by renting them out; one can rent a nice 4 bed family house in Bedford for under £1K a month and the most these BTLs can expect is £4-450 per month for these tiny flats - that's a yield of just 2.7% plus the inevitable capital loss on this chronically overpriced junk.

[Guest Mr Parry]

Not all will have better jobs.

But many will, as they progress in their careers.

Sadly, I agree with your larger point that the UK is in for a tough several years.

So the property rally, when it does come, is likely to be a weak and half-hearted rally.

Had an old colleague on the phone today. He's experienced in his field, but is seriously worried. We are in land regeneration. I'm fortunate to be doing the Olympics job at present but many consultants and contractors are at the mercy of the house builders. Lines of credit having dwindled, I expect the building market and all associated suppliers and professions to be very badly hit.

Fact is Dr. B, the UK is finished. What exactly does the UK offer the World anymore . . to service all this debt?

[crash2006]

Right.

And the banks were there happily aiding and abetting the wild speculation.

They will suffer too, and so they should, they should, they should.

In the end, they have helped to bring excess supply to the market.

And those that were rise enough to stand bavk and just observe, while building their savings,

will be the ultimate beneficiaries.

It's a slow process, but teh cycle is a wonderful teacher- isn't it?

Some of us have seen it before, and are amazed at how the drama plays out again and again.

Even if you dont have any savings or hardly any, if you dont have debt then your in a good position a very good position, as most of the country rushed out to get on the BTL.

i was too young to understand the last one, however ive been reading about how economics started way back BC, the greeks trying to understand the way finance works even thou there wasnt any economists around. I'm a strong believer in universal balance my theory is a bit complicated and critised by professors because its too simple, the fact is its so simple, but its everywhere in life.

[crash2006]

Cut the exchange rate enough, change some government policies...

and then there will be plenty.

For instance, the UK will make a great theme park for wealthy Chinese (Haha- I'm only slightly joking)

if you do all that we'll be changing roles with them.

[Frank Hovis]

This bit was the big news for me, maybe you all knew this:

One Telegraph reader paid £139,000 for his off-plan two-bedroom flat in Liverpool two years ago. The association reckoned the property would be worth at least £153,000 when it was completed last year. But when the reader remortgaged he discovered that the property was worth just £121,000 and he has had to reduce his mortgage by £20,000 to qualify under the lender's buy-to-let criteria. Fortunately he had the means to reduce the mortgage and he has tenants in the flat - the rent now covers the new lower mortgage. But other landlords in the block may not have been so fortunate.

I assumed that these BTL mortgages just rolled over and that the problem was being caused by the loss of lower fixed rate deals leading to a higher monthly cost. If on remortgaging these lower values mean there is an instant requirement to cover the shortfall between mortgage and valuation (as in this case) then negative equity isn't just a theoretical thing that means you can't afford to move. It needs to be cleared every few years in cash.

Wow. There's a major new crash trigger if ever I saw one.

[Bingley Bloke]

Some new-build flats went up near me a couple of years ago. The asking price started at £168,950. This was systematically reduced until they finally started selling when the asking price had fallen to £124,950. That's a fall of 26%. I don't know what the eventual selling price was but many of them have been up for rent since and are sitting empty because the rents are out of line with local wages. If wages won't stretch to covering the mortgage repayments on a property then nor will they stretch to covering a rent that covers the mortgage repayments on a property. When all said and done, wages are the key.

[Leonard Hatred]

If you haven't already gathered, I despise newbuild flats, for no other reason than they're just shit quality housing. This is what Labour wants the future to be like - families packed into these tiny griefholes.

[Bloo Loo]

If you haven't already gathered, I despise newbuild flats, for no other reason than they're just shit quality housing. This is what Labour wants the future to be like - families packed into these tiny griefholes.

They wouldnt be so bad, but bearing in mind everyone has at least one car these days, you would expect your nice shiny kennel to at least come with ONE parking space, many dont!

[M21er]

This bit was the big news for me, maybe you all knew this:

One Telegraph reader paid £139,000 for his off-plan two-bedroom flat in Liverpool two years ago. The association reckoned the property would be worth at least £153,000 when it was completed last year. But when the reader remortgaged he discovered that the property was worth just £121,000 and he has had to reduce his mortgage by £20,000 to qualify under the lender's buy-to-let criteria. Fortunately he had the means to reduce the mortgage and he has tenants in the flat - the rent now covers the new lower mortgage. But other landlords in the block may not have been so fortunate.

I assumed that these BTL mortgages just rolled over and that the problem was being caused by the loss of lower fixed rate deals leading to a higher monthly cost. If on remortgaging these lower values mean there is an instant requirement to cover the shortfall between mortgage and valuation (as in this case) then negative equity isn't just a theoretical thing that means you can't afford to move. It needs to be cleared every few years in cash.

Wow. There's a major new crash trigger if ever I saw one.

You're right! This is the BIG news - It's been mentioned on here in other threads about the BTL lenders' ability to demand margin calls to maintain LTV but this is the first? evidence of it actually happening??

M21er

[Bloo Loo]

You're right! This is the BIG news - It's been mentioned on here in other threads about the BTL lenders' ability to demand margin calls to maintain LTV but this is the first? evidence of it actually happening??

M21er

It smost likely a review at the end of the fixed term deal, so it was renew ( his mortgage), go to SVR or change lender.

The effect is the same.

[sossij]

The price of new build flats are heading for a "full scale crash", causing misery for tens of thousands of buy-to-let landlords who gambled on an ongoing property boom, writes Paul Farrow

I was pleased to see this link off your page:

http://www.telegraph.co.uk/money/main.jhtm...21/cmbtl121.xml

Taxman targets buy-to-let landlords

Last Updated: 12:15am GMT 22/02/2008

HM Revenue & Customs (HMRC) is targeting landlords who have failed to pay tax on rental income on their buy-to-let properties, writes Paul Farrow

It is sending letters to self-assessment tax payers who they believe may be receiving income from rental properties.

The letter, being sent to accountants, says: "I have information that suggests that your client has received rent from property but has not included it in his/her Tax Return. I need to check with you if my information is correct and, if he/she has received rents, to work out any tax that may be due."

About time too!

[bomberbrown]

As I've said time and time again, all these new 'luxury' apartments are going to be the social/council housing of the future.

We witnessed the exact same thing in the 60's, thousands and thousands of cheap high rises built to home the masses. The only difference back then is they were built by councils and local authorities to rent out, not like the past decade where they have been built by private developers for sale.

IMHO, this has to be one of the biggest scandals of recent UK history. See my sig.

[Prophet_of_Pwnage]

This bit was the big news for me, maybe you all knew this:

One Telegraph reader paid £139,000 for his off-plan two-bedroom flat in Liverpool two years ago. The association reckoned the property would be worth at least £153,000 when it was completed last year. But when the reader remortgaged he discovered that the property was worth just £121,000 and he has had to reduce his mortgage by £20,000 to qualify under the lender's buy-to-let criteria. Fortunately he had the means to reduce the mortgage and he has tenants in the flat - the rent now covers the new lower mortgage. But other landlords in the block may not have been so fortunate.

I assumed that these BTL mortgages just rolled over and that the problem was being caused by the loss of lower fixed rate deals leading to a higher monthly cost. If on remortgaging these lower values mean there is an instant requirement to cover the shortfall between mortgage and valuation (as in this case) then negative equity isn't just a theoretical thing that means you can't afford to move. It needs to be cleared every few years in cash.

Wow. There's a major new crash trigger if ever I saw one.

Yeah i thought that too. Their reader was fortunate to be able to stump up £20k to meet the margin call and even luckier he hadn't been scammed into paying £200k+ for the flat as many others have been. But I suspect most amateur new-build flat BTLers would be stuffed if a demand for £20k came through their letter box.

Edited February 22, 2008 by Prophet_of_Pwnage