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Hi All,

New to this forum so hoping this post finds all well and in the right place.

After some advice regarding the purchasing of a new home during the COVID-19 pandemic and looming UK recession.

My wife and I have recently (Feb 2020) reserved a home with a UK house builder and are now in the process of signing legal docs etc. In total, we are already invested around £10,000 in the property which is essentially made up from plot reservation fees, property upgrades, mortgage products fees, legals fees etc. but have not yet exchanged contracts or paid our deposit.

With a UK recession and downturn in the housing market inevitable, we find ourselves in a difficult position. Do we continue with the purchase of our home? Back out of the deal and hope the house price will be reduced and plot still available? Or trying to renegotiate the asking price? The latter would be the ideal option for us but we are pessimistic that the builder would ever entertain this idea. We have also read that builders are inclined to pull out of sales even if such questions are asked of them.

Has anyone else found themselves in the same position? Is the exception that new home prices will also drop during this house crash? Has anyone else tried to renegotiation to new home builders?

Any input/advice would be much appreciated. Thank you in advance. 

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Drop out. Builder won't have done your extras so can't charge you for those. 

You probably only put down a reservation fee of £ 1000. 

So just cut your losses and walk away. 

(If you had to pay more than £1000 for the mortgage offer that's a clear sign you've over-stretched financially. )

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There was a new build estate near me that was completed in late 2007. The prices paid were IRO of £190-220k back then.They now sell for £160k and some people have made financial commitments that they will never recover from (some have sold, crystallising losses of £80-90k!)

I don't know enough information about you or the house/area you are buying into but ffs be careful and think whether you need the house or want the house.

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You’ve come to a website call HPC to ask this question ? I think the fact you’re here answers your own question and you’re simply looking for confirmation. We don’t have enough facts to help really but if it helps you someone saying so then yes, run away!

Or maybe at least try speaking with the builder saying you’ve been furloughed or had a Covid pay cut and can’t afford it anymore and ask if they can help with a small reduction. Only you can make these decisions though. Sorry you find yourself in this difficult position.

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New homes are like new cars: there is always a depreciation once you own it, because they are not new anymore.

This effect is more noticeable as HTB pushes up the prices.

If you want more accuracy instead of generalities post the link of the development and the price you're buying at.

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The chances are that you would be better of withdrawing. Is it likely that the price will increase in the next 2 years?

But, go ahead providing:

  • You are buying a home and not an investment
  • You can still afford the monthly repayments on half your combined income
  • And this remains true if interest rates rise to 8% (for example)
  • You would be happy to have to stay for 20 years
  • You are fixing your mortgage rate for the longest possible duration
  • Your repayment term is as short as possible
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On 5/16/2020 at 10:58 PM, simon2 said:

New homes are like new cars: there is always a depreciation once you own it, because they are not new anymore.

This effect is more noticeable as HTB pushes up the prices.

If you want more accuracy instead of generalities post the link of the development and the price you're buying at.

That’s a fairly recent phenomena. Years gone by inflation would quickly bring prices up. However, with limited inflation at the lower end buying new has the potential to put you in immediate negative equity! Add to that the build quality is more often than not dreadful. Without help to buy I think the builders would be in trouble.

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1 hour ago, MarkD said:

Without help to buy I think the builders would be in trouble.

No I don't think they would. HTB is an incentive, so they could change their behaviour if it was to be taken away.

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1 hour ago, MarkD said:

That’s a fairly recent phenomena. Years gone by inflation would quickly bring prices up. However, with limited inflation at the lower end buying new has the potential to put you in immediate negative equity! Add to that the build quality is more often than not dreadful. Without help to buy I think the builders would be in trouble.

Yes, this is correct. Although the builders margins are so wide and their profits so big, HTB is merely a bonus rather than being anything threatening. 

Very few new builds I have seen saw a sale straight away after completion, in the previous London environment price inflation even after a year or two would negate any new build premium.

Looking at some ex-new developments I am quite surprised how few transactions go through, despite seeing them on sale regularly.

https://www.rightmove.co.uk/property-for-sale/property-79793569.html this came up today. Completed at the end of 2016, so over 3 years ago - must be over 100 flats in the development. Yet looking on Landreg, only 2 have changed hands in all that time. 

Looking closer at the prices, you can see why, both prices involved taking a loss. There has been no price appreciation at all in the block, and a low level of sales because listings have come on with their owners wanting a profit, and when they cannot get it, the listings disappear from the market. 

So there is a kind of floor at the moment on a lot of these things. That's replicated across many 2016/2017 new builds - very thin volumes, a couple of people had success, a couple of people sold out under. For older developments transaction levels are better, I'd guess that is because even with a slight dip in prices people are able to exit with profit.

Gonna be interesting if some sales in the new builds become forced.

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On 14/05/2020 at 15:27, BishBashBosh2020 said:

Hi All,

New to this forum so hoping this post finds all well and in the right place.

After some advice regarding the purchasing of a new home during the COVID-19 pandemic and looming UK recession.

My wife and I have recently (Feb 2020) reserved a home with a UK house builder and are now in the process of signing legal docs etc. In total, we are already invested around £10,000 in the property which is essentially made up from plot reservation fees, property upgrades, mortgage products fees, legals fees etc. but have not yet exchanged contracts or paid our deposit.

With a UK recession and downturn in the housing market inevitable, we find ourselves in a difficult position. Do we continue with the purchase of our home? Back out of the deal and hope the house price will be reduced and plot still available? Or trying to renegotiate the asking price? The latter would be the ideal option for us but we are pessimistic that the builder would ever entertain this idea. We have also read that builders are inclined to pull out of sales even if such questions are asked of them.

Has anyone else found themselves in the same position? Is the exception that new home prices will also drop during this house crash? Has anyone else tried to renegotiation to new home builders?

Any input/advice would be much appreciated. Thank you in advance. 

No details of the price or the property type.

If its a new flat over 250k leasehold then no brainer walk if you can

if its a small affordable house sub 250 and you have already spent 10k then its not so clear.

10 is also nothing to loose if the property is over 500k etc etc

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34 minutes ago, simon2 said:

 

35 minutes ago, simon2 said:

Yes, this is correct. Although the builders margins are so wide and their profits so big, HTB is merely a bonus rather than being anything threatening. 

Very few new builds I have seen saw a sale straight away after completion, in the previous London environment price inflation even after a year or two would negate any new build premium.

Looking at some ex-new developments I am quite surprised how few transactions go through, despite seeing them on sale regularly.

 

Gonna be interesting if some sales in the new builds become forced.

 

 A functioning market instils buyer confidence allows for price discovery, looking at comparables from sales years ago doesn't really show the current trends, so lack of sales data in itself increases risk . Home valuation always seems quite a blunt instrument and a very imprecise science at the best of times.

 In very unpredictable conditions now it would be interesting to see the view of builders and developers when it comes to buying land, with and without planning permission.  I suspect they will calmly be projecting a  'business as usual, nothing to worry about'  attitude to buyers but behind the scenes may already be making some big changes themselves in any future investment .

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51 minutes ago, simon2 said:

..snip

https://www.rightmove.co.uk/property-for-sale/property-79793569.html this came up today. Completed at the end of 2016, so over 3 years ago - must be over 100 flats in the development. Yet looking on Landreg, only 2 have changed hands in all that time. 

...snip

From Rightmove (my bold/underline):

Quote

 

House Prices in SE8 5EX

Properties in SE8 5EX had an overall average price of £425,000 over the last year.

Overall, sold prices in SE8 5EX over the last year were 2% up on the previous year and 15% down on the 2016 peak of £499,643.

 

That's some drop for London!  The only two properties sold at a loss from their initial price are no where near 15% so where is Rightmove getting this data/modelling from I wonder?

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I watched homes under the hammer a couple of weeks ago and saw a 2 bed flat in Croydon 'valued' at 715,000. At that point I thought crash here we come! I feel sorry for anyone daft enough to buy at that price. They'll be looking back in a year or two and saying "How can we have been so stupid".

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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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