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bpw

Are New Houses Good Value?

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The topic description is taken from the an article about George Wimpey Ltd who have recently warned that last years profits are down, a lot. They blame people like us and made the statement

'very tough' year when buyers were unnerved by doom merchants

This raised a question in my mind. Are new houses good value or not. If they are as grossly expensive as older properties then surely Wimpey are gouging customers with excessive margins. I'm wondering if there is someone out there with a idea of what it really costs to build a home and what they sell it for.

Basically are we doom merchants who fail to accept that costs are a reasonable reflection of the market or are the likes of Wimpey cynically cashing in on what seems to me like a ponzi scheme.

BPW

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Heh, I think that house prices are the new religion. Why?

Well, if you're in a house with inflated paper value, then this value is real for as long as you and everyone else believes it to be real.

If we all continue to believe, then it continues to be real (really!) and this explains why some people on this forum get so tetchy when the coming crash is mused upon by the 'heretics'.

Cinnamon

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The topic description is taken from the an article about George Wimpey Ltd who have recently warned that last years profits are down, a lot. They blame people like us and made the statement

'very tough' year when buyers were unnerved by doom merchants

This raised a question in my mind. Are new houses good value or not. If they are as grossly expensive as older properties then surely Wimpey are gouging customers with excessive margins. I'm wondering if there is someone out there with a idea of what it really costs to build a home and what they sell it for.

Basically are we doom merchants who fail to accept that costs are a reasonable reflection of the market or are the likes of Wimpey cynically cashing in on what seems to me like a ponzi scheme.

BPW

If you dismantled one and lined all the constituent parts up you would relalise you have been conned and someone has made a lot of money.

Builders generally use the one third rule. 1/3 for the cost of land, 1/3 for the building and fitting and 1/3 profit. 100K land, 100K materials (absolute max) 100K Profit for a 300K house. Now if they have just built this little beuty and its value dives by 50K they will be pretty miffed as this eats directly into their profits, they are praying for a recovery, if it does not happen in the spring they will be forced to offload.

The workmanship is shoddy, most dont even have proper brick internal walls, just dodgy bits of 4x2 and plasterboard.

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Notice that the VIs are seeking to blame the "doom merchants" for the crash, not themselves for talking the market up to an unsustainable level in the first place. :angry: :angry: :angry:

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The builders are the biggest winners in times of rampant HPI. Their costs haven't changed significantly but suddenly they can sell their end product for twice the price.

May they be the first to go to the wall on the way down!

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BBC “working Lunch” (12:30 today) seemed to be hinting that this was bad news, twice in two days re the building companies, even making play on the discounting that was going on. Could not believe my ears.

Strange, at the end of the day, is the BBC getting the message at last ??? :o

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Notice that the VIs are seeking to blame the "doom merchants" for the crash, not themselves for talking the market up to an unsustainable level in the first place. :angry: :angry: :angry:

Precisely!! Spot on. This press release says so much about the whole "Housing Market"/Industry. The VI's just see it as an endless cash cow which can never go wrong for them - and that there is this absurd, crazy and stupid notion they hold that prices just automatically keep going up so that in just a few years time a 1 bed flat above a chip shop anywhere in the UK [or the world for that matter!] is just automatically going to be "WORTH" £500,000 soon -- and in no time much longer, £1 million!!!! It is just SO pathetic!!

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The builders are the biggest winners in times of rampant HPI. Their costs haven't changed significantly but suddenly they can sell their end product for twice the price.

May they be the first to go to the wall on the way down!

Not true. They have to buy increasingly-expensive land. That's where the bulk of the money goes... to the land owners. Karl Marks was right!

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Not true. They have to buy increasingly-expensive land. That's where the bulk of the money goes... to the land owners. Karl Marks was right!

That is true of small time builders and new wannabe property developers, but the big builders have had significant land banks built up before land became expensive, believe me they have made a killing in the last couple of years.

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i reckon the average plot has cost them about £50k. obviously varies across the country and the density of development, planning gain etc.

a 3 bed detached estate house will cost abut £80,000 to build (materials and labour)

there are overheads( marketing costs, inhouse architects, etc) , but i doubt whether these add more than about £20k to the costs

if they worked on a 15% profit that would give a sales price of about £180k.

in most places you cant buy a new 2BR flat for that

Edited by the don

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The topic description is taken from the an article about George Wimpey Ltd who have recently warned that last years profits are down, a lot. They blame people like us and made the statement

'very tough' year when buyers were unnerved by doom merchants

This raised a question in my mind. Are new houses good value or not. If they are as grossly expensive as older properties then surely Wimpey are gouging customers with excessive margins. I'm wondering if there is someone out there with a idea of what it really costs to build a home and what they sell it for.

Basically are we doom merchants who fail to accept that costs are a reasonable reflection of the market or are the likes of Wimpey cynically cashing in on what seems to me like a ponzi scheme.

BPW

A builder on holiday told me it would cost him about 50->60k to build a new bigish detached house complete with fittings and fixtures... this house will sell for 300->400k.

These costs look a bit higher, but not much

http://www.whatprice.co.uk/house.html

The expensive bit of a house is the land, building costs dont go up that much, when HPC occurs land prices also crash. Developers buy up land years ahead to get it at a cheap price and to artificially raise the price of land....

Recently the government has talked about a land tax, so land with planning permission on it that isnt used will be subject to a new tax. This will probably help the HPC, as developers will try and offload as much land as possible or build on it causing land prices to drop.

Edited by moosetea

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Builders tend to be the first to cut prices in a downturn. Why? Cashflow!

They have to keep money coming in to pay the bills, wages and shareholders. They will trim their margins to do so. This certainly happened last time.

The other cyclic phenomenon is housing density. As prices go up builders try to squeeze larger numbers of houses into smaller parcels of land to maximise their profit. But as prices come down the economics swing and they have to switch from quantity to quality. Hence they will switch back to larger homes with bigger gardens (as in reality its land prices that have come down) to attact buyers.

Also, as the frenzy to build new properties dies back the quality goes up as the poor tradesmen are laid off and those that remain have more time to do a good job.

IMHO

Regards

BP

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I'm a consulting structural engineer, and for the last 4 years almost every project has been residential.

However the-times-they-are-a-changing and commercial properties are coming back into fashion.

Its in indicator that residential properties are no longer seen as being such a good investement.

No one is more pleased than us engineers about this though, property developers are the worst kind of clients to work for.

Don't cry for them - banks happily finance developers through the lean times, cos they know that eventually the cycle comes around again.

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i reckon the average plot has cost them about £50k. obviously varies across the country and the density of development, planning gain etc.

a 3 bed detached estate house will cost abut £80,000 to build (materials and labour)

there are overheads( marketing costs, inhouse architects, etc) , but i doubt whether these add more than about £20k to the costs

if they worked on a 15% profit that would give a sales price of about £180k.

in most places you cant buy a new 2BR flat for that

sounds light to me that.

I'm a consulting structural engineer, and for the last 4 years almost every project has been residential.

However the-times-they-are-a-changing and commercial properties are coming back into fashion.

Its in indicator that residential properties are no longer seen as being such a good investement.

No one is more pleased than us engineers about this though, property developers are the worst kind of clients to work for.

Don't cry for them - banks happily finance developers through the lean times, cos they know that eventually the cycle comes around again.

Could not agree more about developers. They are constantly squeezing the contractors/design team (who are usually novated on design and build).

Unfortunately, since programmes like 'property ladder', every idiot with a few bob thinks he's a developer.

Some are as thick as whale omlette.

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Labour costs for building were going up in line with HPI untill the arrival of cheap eastern european labour ,since their arrival the wages for Brit construction workers has stayed static even dipped slightly,I should think if you are a builder you could build a house cheaper than ever,just get a load of Poles working on it,the standard won,t be as high but that will not be apparant untill after the buyer has moved in.

i reckon the average plot has cost them about £50k. obviously varies across the country and the density of development, planning gain etc.

a 3 bed detached estate house will cost abut £80,000 to build (materials and labour)

there are overheads( marketing costs, inhouse architects, etc) , but i doubt whether these add more than about £20k to the costs

if they worked on a 15% profit that would give a sales price of about £180k.

in most places you cant buy a new 2BR flat for that

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i reckon the average plot has cost them about £50k. obviously varies across the country and the density of development, planning gain etc.

a 3 bed detached estate house will cost abut £80,000 to build (materials and labour)

there are overheads( marketing costs, inhouse architects, etc) , but i doubt whether these add more than about £20k to the costs

if they worked on a 15% profit that would give a sales price of about £180k.

i donta gree with this price above of £180k.

in preston they built new 3 bed houses in 2002 for £85k

that included land & building material and labour costs. = £85k

this year they are asking £180k for the same.

their costs didnt rise. just they cashed in.

note

*they dont pay their employees double....

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We were looking at self build for a while a year or so ago - the build price is dependant on the size of property of course, but our rough calcs at the time suggested a build price of about £70-80K for an average 3 bed house on a flat site.

It was the non availability of plots at reasonable prices that killed the idea off - I'm still looking.

We all talk of house price inflation - but really its land values that are absurd.

The "Housebuilders Bible" 6th Edition 2004 lists the following build costs

(its a self builders manual)

1 bed flat 40m2 - £20-30K

terrace two bed house 60m2 - £30-50K

semi 3 bed 90m2 - £50-75k

detached 3-4 bed 130m2 £70-120k

How could we lobby for a change in the stupid and restrictive planning regs. ?

PO

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1/

"buyers were unnerved by doom merchants"

... and not by high prices?

That statement makes it exactly clear where the writers economic interest lies

2/

"Builders tend to be the first to cut prices in a downturn"

We haven't seen that yet.

What we have seen is all manner of "incentives" which disguise price cuts, and allow the builders

to put a fraudulent gross figure (before incentives) into the official Land Registry data. They hope

this will mislead future buyers misvaluing other properties in the same project.

Instead of "doom merchants", the media should be discussinf "fraudulent price reporting"

Precisely! The huge levels of Fraud in the "Housing Industry" seem to go unchecked...

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Not true. They have to buy increasingly-expensive land. That's where the bulk of the money goes... to the land owners. Karl Marks was right!

This is true and not true. The land they are building on now was usually bought a couple of years or more ago. It's true they are adding to the land bank all the time. I would be interested to know what the big boys are paying for land in the South East now - as opposed to say 3 years ago.

Is that Karl Marks of Marks and Spencer. Or of the Marx brothers?

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Guest Winners and Losers

Excellent point. They are just trying to say that it is not reality, but 'doom mongering'.

Notice that the VIs are seeking to blame the "doom merchants" for the crash, not themselves for talking the market up to an unsustainable level in the first place. :angry: :angry: :angry:

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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