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Advice on reserved New Build flat - Coronavirus


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My 1st post and please be kind :)..

I have reserved a new build flat pre-coronavirus lockdown with Bloor homes in Buckinghamshire. I negotiated a stamp duty contribution with the builder, Its all agreed and I put in an advance of £500. I did searches and paid my solicitor advance. But Nothing moved from the bank during the lockdown and the builder resumed dialogue with me last week anticipating that the lockdown will ease out from this week.

I'm really worried about the house price fall due to the coronavirus and especially being a new build flat, the risk is higher. Equally we like the flat and there arent many other properties in the area where we want to move and we are up against a deadline for moving by Sept for my son's secondary school transfer.

I have asked the builder to reconsider the offer and asked for a price discount on the plot given this situation and 5% deposit contribution since the bank has asked for an increase in deposit since they changed the LTV limits for new build flats. 

The builder is not agreeing to it and wouldnt give any discounts to the price since they fear it would impact upcoming plots in the development. The builder is playing hardball with me stating the flat had lot of interests before and they are very hopeful they could sell even if it comes back into the market. They offered a furniture pack as a good will to proceed with the deal and they claim its worth 4K but Im sure its around only 2.5K worth.

I would appreciate any advise from the experts in terms of sticking my guns to ask for a 5% contribution or should I pull out of the deal if the prices are going to crash for sure.

How much margins would the sales managers/directors have to play with? 

Any advice will be hugely appreciated.

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Sounds risky to me. Have you looked at rental properties in the area? From what I have been hearing rents may be going down, you may be able to get a years lease at a bargain basement price, that would give you some breathing space to see what places to purchase look like a year down the line.

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4 hours ago, erat_forte said:

Sounds risky to me. Have you looked at rental properties in the area? From what I have been hearing rents may be going down, you may be able to get a years lease at a bargain basement price, that would give you some breathing space to see what places to purchase look like a year down the line.

Thanks for your reply Erat_forte... really apprecaite your view and the time.

Rental could be an option, but we are keen to own our home... especially wifey is all set, so its hard to go back on that.. :( 

Do you think the prices will drop more than 10%? and also any idea on margins which the builders operate? So I can stick to my guns and haggle for the 5% to cover the dip...

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I would delay as much as possible. Their financial year ends 30th June, so I bet they will push for completion before that. Perfect time to be striking a great deal.

Just delay, use any excuse in the book (as the builders do), and see how the land lies. Prices are certain to fall.

 

Actually, you should be asking what excuses you can use to delay exchanging - that would be a good thread!

 

FYI. I bought a new build house for £220k in 2009 at the tail end of the last slump (22% off). The peak sale was £285k 9 months before (same house, slightly worse plot). I've now sold it. They will lower prices to sell, they always do. They may delay building new houses as the demand reduces though. 

 

Edited by Jason
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14 hours ago, Karthick said:

My 1st post and please be kind :)..

I have reserved a new build flat pre-coronavirus lockdown with Bloor homes in Buckinghamshire. I negotiated a stamp duty contribution with the builder, Its all agreed and I put in an advance of £500. I did searches and paid my solicitor advance. But Nothing moved from the bank during the lockdown and the builder resumed dialogue with me last week anticipating that the lockdown will ease out from this week.

I'm really worried about the house price fall due to the coronavirus and especially being a new build flat, the risk is higher. Equally we like the flat and there arent many other properties in the area where we want to move and we are up against a deadline for moving by Sept for my son's secondary school transfer.

I have asked the builder to reconsider the offer and asked for a price discount on the plot given this situation and 5% deposit contribution since the bank has asked for an increase in deposit since they changed the LTV limits for new build flats. 

The builder is not agreeing to it and wouldnt give any discounts to the price since they fear it would impact upcoming plots in the development. The builder is playing hardball with me stating the flat had lot of interests before and they are very hopeful they could sell even if it comes back into the market. They offered a furniture pack as a good will to proceed with the deal and they claim its worth 4K but Im sure its around only 2.5K worth.

I would appreciate any advise from the experts in terms of sticking my guns to ask for a 5% contribution or should I pull out of the deal if the prices are going to crash for sure.

How much margins would the sales managers/directors have to play with? 

Any advice will be hugely appreciated.

From my experience it is new build leasehold that tends to lose the most in a crash.

Question you have to ask yourself is, is this your forever house. If you buy it now then you could be stuck there a long time. And most families want a house with a garden, not a new build flat when they get kids.

Thing is if prices do drop, you may find that the price you are paying for this new build is enough to buy your next rung on the ladder. Since new build flats tend to drop more than houses, you could find your next step on the ladder is much greater when you try to move if you buy this.

If you wait now, you could leapfrog straight into a house and that could save you five or 10 years of time.

OTOH there is no certainty in what will happen in the marketplace. Look at the the last 12 years ! it could be that prices could go up ! You have to ask yourself what scenario is most likely.

But if it were me, I would wait. Is spending another 1-2 years in rental in a time of high uncertainty really that much of a compromise ?

I am not an expert. And do your own research of course. Just some points to make you think and possibly more importantly, help persuade.

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Are you at asking price? 

I went on their website and they are offering to pay your mortgage for 6 months. It's discounting without affecting their asking price, they may be more amenable to that.

You only have to look at the accounts of the homebuilders to realise that profits on building these houses are vast.

If you have a new build in this area where people can buy it on Help to Buy, IMO the price will drop more than 10% after, because future buyers don't get the HTB bonus.

This effect was initially was hidden in London because price rises have hidden it. But look blocks of flats in London built around 2016-2017, prices are lower today than they were then. Amazingly some still look expensive.

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Thanks Jason, Gigantic Purple and Simon for your replies. I really appreciate all your views.

I'm on asking price yes... The sales manager is saying the 6 months mortgage would come from the same pot as that of the stampduty. 

I think listening to all of you, delaying would be the best course of action and see how the market changes.. Furlough scheme extended till october and sterling has stablised after this announcement!!!  So it could swing either side ... very stressful times..

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Is there any chance that if the rest of the flats don’t sell,that they could be sold as a job lot to the council,housing council tenants.
Of course if you asked the builder this they would deny it.

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Is it Winslow? 

TBH there is not much competition out there, its a small place. 

Some places in London the premium for the new build is very high over the older-style properties, but I don't see that being the case here. 

You could try snubbing the furniture pack for cold hard cash.... they may be indifferent to how £4k is spent unless they are telling lies about it. Or maybe try some other method, ie pay council tax and service charge for a year. 

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On 12/05/2020 at 00:58, Karthick said:

I have asked the builder to reconsider the offer and asked for a price discount on the plot given this situation and 5% deposit contribution since the bank has asked for an increase in deposit since they changed the LTV limits for new build flats. 

The builder is not agreeing to it and wouldnt give any discounts to the price since they fear it would impact upcoming plots in the development...

  The 'plot' - has it been built yet?  is it likely to be delayed at all?  no danger of the builders going bump?  ... then of course the expectation of your current financial position continuing in the short to mid term: nothing is certain in these times now

 All economic forecasts are between very bad and dismal, seems you are taking a big risk off the developer for only a small inducement.  I know HPC is the mantra here over the last decade I've lurked here, but we really could be headed into a perfect storm now.

 If your flat is 200k and you are less than 2k into it so far , I'd put the risks of prices dropping in adjoining flat sales a lot more than 1%, and likely double digit reductions.  But you have sort of reserved it too. The ball is in your court now, maybe bounce it for a while longer before taking your shot.

  

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I've been waiting to but for 10 years. I always asked myself - am I happy with this level of debt, in order to stay in this property for life. The answer was always "no" so I carried on renting. In hindsight, if I had bought, I would have been fine because interest rates stayed low. However hindsight is a wonderful thing, and nobody knows what will happen in the future.

So, to your particular situation - do you feel the property is value for YOUR money? Are you happy to stay there forever?

Personally I am waiting for a house that requires a mortgage of 3x my household income or less. It mustn't compromise on space, location or garden (i don't have ludicrous expectations by the way, just enough space to be comfortable).  Once I find one I will buy.

Where do you live at the mo - family? In a mortgaged property? I would try and stay put whilst you see how things pan out - EAs, builders and all those linked to the sale are just SALESPEOPLE - they will say anything to get your money. Do not trust them.

Set up some saved searches on rightmove with alerts .... I believe you'll start seeing a flood of new listings in next few weeks.

Good luck, and don't be pressured by builders, EAs, wife (easier said than done!), or people on forums :)

 

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9 hours ago, poohbear said:

Is there any chance that if the rest of the flats don’t sell,that they could be sold as a job lot to the council,housing council tenants.
Of course if you asked the builder this they would deny it.

This would be a real concern as if this happens its likely to push the value of the privately owned flats down even harder.  Don't do anything hasty.

I am I correct in thinking that so far you will only lose your £500 deposit if you walk away now?  If that is correct, that is a tiny loss compared to the probable drop in price that is likely to be coming down the line.

In a housing recession, flats are always hit the hardest.  This housing recession (if it happens) will include peoples desire to have a private outdoor space (a garden) so is likely to impact flats even harder than normal.

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What is the point of asking for advice here?

Many here are embittered by property prices and seems to resent anyone who gets out of the rent trap so the advice will be not buy.

Some of the experts here could have afforded to buy 2008-2012 but thought they were financial wizards and did not.

As a result they have been paying rent for years and cannot afford to buy.  You need to think what suits your own situation and make your own judgement.  

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  This 5% LTV mortgage change on new builds could be a deal-breaker for some, maybe blowing out a few deals on previously reserved plots. 

 Maybe just tell him straight, You like it and want to proceed but market conditions have changed and you have big concerns about it's current valuation and are prepared to walk away. Look elsewhere and trust your instincts.  You are dealing with an experienced negotiator but don't let him take control. 

 " Everything back to normal now, business as usual" they will say , but this is unprecedented: never in our history has the property market been closed like this, or have we faced such dire economic forecasts. 

 The normal fear of losing what you want and then seeing it increase in value soon after does not really apply here, no-one is seriously prediciting HPI anytime soon.

 

(You might try to edit some of the location detail , this forum has a very wide reach and visibility - often more guests than members browsing on here)   

 

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1 hour ago, richmondtw said:

What is the point of asking for advice here?

Many here are embittered by property prices and seems to resent anyone who gets out of the rent trap so the advice will be not buy.

Some of the experts here could have afforded to buy 2008-2012 but thought they were financial wizards and did not.

As a result they have been paying rent for years and cannot afford to buy.  You need to think what suits your own situation and make your own judgement.  

So which VI are you Triathlon? Localhero?

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1 hour ago, richmondtw said:

 

As a result they have been paying rent for years and cannot afford to buy.  You need to think what suits your own situation and make your own judgement.  

 crash and mass repo`s suit my own situation then i can pick over the bones as a cash buyer. The fun part is watching the indebted masses down in their sea of debt while the life boat is firmly for 1st class passengers only. 

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1 hour ago, richmondtw said:

What is the point of asking for advice here?

Many here are embittered by property prices and seems to resent anyone who gets out of the rent trap so the advice will be not buy.

Some of the experts here could have afforded to buy 2008-2012 but thought they were financial wizards and did not.

As a result they have been paying rent for years and cannot afford to buy.  You need to think what suits your own situation and make your own judgement.  

I know people who did buy a small house, a few years back, now have kids, but can't afford to upsize as house prices have outstripped wages. What would you say to them?

I agree though that we are as biased here as EAs, house builders, and people who KNEW the horse they backed was going to win.

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I say walk away, because 

1. You've only lost £500. ( do not agree to pay any more now)

2. If developer goes bust, you lose your deposit. Big developers do go bust in exactly this situation, beginning of a recession, and then you're left with slapdash finishing off by an insurer after a years long delay. 

3. Babies don't actually need one person paying a mortgage that was based on 2 incomes. 

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Bloor are actually extremely profitable. You can check their accounts, unlikely to go bust in the short-term IMO. Operating margins are almost in line with the big housebuilders. Ergo at the asking price I would bet there is a fat profit margin in it for them, it's just who blinks first.

Personally, I think the replies are quite balanced... I'd be against new-build in London where there is plenty of older style property available at a much lower price, but in this location not so.

There seems to be some real vacuous thinking out there on all sites. Something like 'buy now, in the long run prices always go up' is never challenged on sites like Mums/MSE, even though in parts of the country that adage is certainly not true. As I see it a newbuild in London that cost £480k in 2016 aided by HTB is quite unlikely to get back to that level for some time. (The cost of that sans-HTB was around £400k pre-lockdown and may be even less now).

And that's only in nominal terms. It amazes me that a good chunk of people are unable to see the difference between nominal and real, but that bodes well for the government.

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1 hour ago, simon2 said:

Bloor are actually extremely profitable. You can check their accounts, unlikely to go bust in the short-term IMO. Operating margins are almost in line with the big housebuilders. Ergo at the asking price I would bet there is a fat profit margin in it for them, it's just who blinks first.

Personally, I think the replies are quite balanced... I'd be against new-build in London where there is plenty of older style property available at a much lower price, but in this location not so.

There seems to be some real vacuous thinking out there on all sites. Something like 'buy now, in the long run prices always go up' is never challenged on sites like Mums/MSE, even though in parts of the country that adage is certainly not true. As I see it a newbuild in London that cost £480k in 2016 aided by HTB is quite unlikely to get back to that level for some time. (The cost of that sans-HTB was around £400k pre-lockdown and may be even less now).

And that's only in nominal terms. It amazes me that a good chunk of people are unable to see the difference between nominal and real, but that bodes well for the government.

I personally would not be buying a new build leasehold flat at this time.

Companies seem ok but you just do not know as this is one weird situation.

I remember working for a hotel company in the credit crunch and they had a 15 million facility and 30 million assets +.

If you cannot roll over the facility and the bank do not want to extend it .... not fun.

If I cannot walk in as soon as sold I would forget it at this time and would never pay for something pending completion.

I am sure Bloor did used to have big profits pre corona 1.6 billion in assets but they also have 946 in liabilities and "only" 7 million "cash in bank".

https://suite.endole.co.uk/insight/company/02162561-bloor-homes-limited

The issue with companies is especially property ones is are those "assets" the type that are valued in a way that reflects what they are worth.

I am not saying this company is not safe......just the at this time ti would not trust any company with the exception of supermarkets medical etc

Take this from the auditors comments in the last published accounts.

 1572150021_Screenshot2020-05-13at15_42_45.thumb.png.c3ef87c14a8213f353a091969429610b.png

and in the accounts themselves

2125024588_Screenshot2020-05-13at15_40_33.thumb.png.9f86e4dc8f7b42dd893af72b5ec91a75.png

So they themselves wisely assert that "Any" deterioration in the UK economy may have a detrimental effect on the demand and pricing for new homes.

This was based on Brexit being adverse.... this Corona shit is x times worse than Brexit could have ever been and that was not even considered........... + Brexit is still ongoing.

 

 

Edited by Fromage Frais
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12 hours ago, longgone said:

 crash and mass repo`s suit my own situation then i can pick over the bones as a cash buyer. The fun part is watching the indebted masses down in their sea of debt while the life boat is firmly for 1st class passengers only. 

 There's going to be winners and losers here no doubt, and good luck with your investment strategy -  wise words perhaps, but not cool to crow and gloat about innocent civilians getting made homeless. 

 I'm here for the group-laugh on 'fatty Wilson', or' 'BTL scum regrouping..' threads,  but this time it has a more human factor.  I've had eviction notices served (and once not even served...) and it is painful, trust me.

 A lot of these 'hardworking families' do actually exist,  worst for those trying their hardest just getting over that threshold between buying and renting cursed by living in a top dollar postcode.

  Careful what you wish for, your '1st class lifeboat' might not be that 'firm' as you think if this goes deeper...

p.s.  watch 'mad max', buy a crossbow and a z1000 motorcycle ..Ist class only.

 

 

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10 hours ago, Megadebt said:

 There's going to be winners and losers here no doubt, and good luck with your investment strategy -  wise words perhaps, but not cool to crow and gloat about innocent civilians getting made homeless. 

 I'm here for the group-laugh on 'fatty Wilson', or' 'BTL scum regrouping..' threads,  but this time it has a more human factor.  I've had eviction notices served (and once not even served...) and it is painful, trust me.

 A lot of these 'hardworking families' do actually exist,  worst for those trying their hardest just getting over that threshold between buying and renting cursed by living in a top dollar postcode.

  Careful what you wish for, your '1st class lifeboat' might not be that 'firm' as you think if this goes deeper...

p.s.  watch 'mad max', buy a crossbow and a z1000 motorcycle ..Ist class only.

 

 

i have no investment strategy unless you call sit and wait a strategy.  Thing is i`m happy to be on either side of the fence.  i can deal with both.  high inflation what ever,  i understand money as a requirement not a lifestyle choice to me. happy with it or out it you won`t need it one day. 

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  • 415 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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