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Oversupply Of Flats In City Centres Is Having An Adverse Effect

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I've been keeping an eye on flats where there has been an explosion of new builds, such as Manchester, Nottingham, Liverpool, Leeds.

In some places these new flats are selling for 100K below their newly built 2005 prices. And it is commonplace now.

Part of the problem is oversupply, rents are being driven down and thus BTL investors aren't touching them. The other problem is a quality issue. Many appear to be being built on the cheap and nasty.

The one thing that's really begun shocking me though, is that while you would expect new builds in the last few years to be falling, city centre flats built *early 2001* are now falling below their initial value.

Now consider this, HPI was rampant in London during this time, but the cities I've mentioned, 2001 I see as pre-rampant HPI, before the new build explosion. So isn't this quite a crazy thing to happen?!

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I've been keeping an eye on flats where there has been an explosion of new builds, such as Manchester, Nottingham, Liverpool, Leeds.

In some places these new flats are selling for 100K below their newly built 2005 prices. And it is commonplace now.

Part of the problem is oversupply, rents are being driven down and thus BTL investors aren't touching them. The other problem is a quality issue. Many appear to be being built on the cheap and nasty.

The one thing that's really begun shocking me though, is that while you would expect new builds in the last few years to be falling, city centre flats built *early 2001* are now falling below their initial value.

Now consider this, HPI was rampant in London during this time, but the cities I've mentioned, 2001 I see as pre-rampant HPI, before the new build explosion. So isn't this quite a crazy thing to happen?!

They have done a thoroughly good job of covering this up, until now. I have read the odd story, but all well behind the curve.

A friend of mine bought a flat in Nottingham 2 years ago, and was beaming at the fact he had bought it for 50k less than the person before.

Now he has almost certainly lost 50k himself, and has a tramp living in the foyer.

Someone mentioned that sale prices by auction are left off the majority of indices. Is this true?

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They have done a thoroughly good job of covering this up, until now. I have read the odd story, but all well behind the curve.

A friend of mine bought a flat in Nottingham 2 years ago, and was beaming at the fact he had bought it for 50k less than the person before.

Now he has almost certainly lost 50k himself, and has a tramp living in the foyer.

Someone mentioned that sale prices by auction are left off the majority of indices. Is this true?

I guess this is the thing a lot of people are scared of.

There's an obvious question of whether these flats are going to turn into social housing. I wonder where the bottom is?

Once exclusive apartments from 2000-1 are now being lumped in with the new flats. Now, given the HPI over the past 7 years, if I told you you could buy a place for what it cost in 2001 would you consider it? It's all very bizarre. And working out some sort of fair valuation is impossible.

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...

Part of the problem is oversupply, rents are being driven down and thus BTL investors aren't touching them. The other problem is a quality issue. Many appear to be being built on the cheap and nasty.

...

Says it all.

...

Someone mentioned that sale prices by auction are left off the majority of indices. Is this true?

I read that too.

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Someone mentioned that sale prices by auction are left off the majority of indices. Is this true?

That was me yesterday. I recall hearing that the Land Registry figures don't include auction sales but I'm too lazy to do the research to confirm this.

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That was me yesterday. I recall hearing that the Land Registry figures don't include auction sales but I'm too lazy to do the research to confirm this.

Wasn't hard to find;

http://www.landreg.gov.uk/kb/Default.asp?T...40&catId=32

The Land Registry HPI is derived from all residential property transactions registered with Land Registry since April 2000, with the following exclusions:

- all commercial transactions

- transfers, conveyances, assignments or leases at a premium with nominal rent which are:

right to buy

sales at a discount

subject to a lease

subject to an existing mortgage

to effect the sale of a share in a property

by way of a gift

by way of exchange

under a compulsory purchase order

under a court order

to Trustees

vesting deeds

transmissions or assents of more than one property

leases for seven years or less

[edit; Which begs the question, how are the new build liar prices going to effect the figures now that their game is up?]

Edited by Paddles

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Now he has almost certainly lost 50k himself, and has a tramp living in the foyer.

Wow - he's got his own tramp...posh b@stard!!!

Ask him if he'd also like his own real live hermit - I'll do it for 25k, as long as I can have Tuesdays off.

Oh, and Sky TV and broadband in my cave...

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Wasn't hard to find;

http://www.landreg.gov.uk/kb/Default.asp?T...40&catId=32

[edit; Which begs the question, how are the new build liar prices going to effect the figures now that their game is up?]

I also mailed them to clarify the situation with regard Auction sales.

Found the following;

The HPI is produced using the Repeat Sales Regression (RSR)

method. Under the RSR method, house price growth is measured

by observing houses which have been sold more than once. By

using repeat transactions, differences in the quality of homes

comprised in any monthly sample are greatly reduced – thereby

ensuring an ‘apples to apples’ comparison.

i.e. The first LR HPI-effecting price of any property will be on the price paid by it's second owner.

If a large number of these distressed city-flat purchases are made with cash, we should expect LR to weigh in heavily in comparison to the others in displaying such transactions in their apple cart.

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So auction prices are included. Strangely, some commercial prices are included too. But that's another matter.

No, I don't think it does. Many of the distress sales at auction will be "following a court order", i.e. excluded.

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No, I don't think it does. Many of the distress sales at auction will be "following a court order", i.e. excluded.

The term "Commercial" relates to commercial properties. It matters little whether the asset is owned by an investor or not, if it's residential, then it's included. There is a grey area where there is a mixture of types, for example a shop with a flat over, but then this should rightly be excluded because the commercial element will add value and is therefore not comparable.

I would say that the majority of properties sold by the banks will be as "mortgagees in possession". In other words, the bank has gained possession of the property through the borrowers breach of contract i.e. it's taken the property back via the mortgage deed and not recourse to the courts. A court order will only be sought where the occupier refuses to leave by agreement, which is actually not that common as it typically substantially increases the bank's costs and in turn the borrowers liability. Obviously, where it is a buy to let, this is not an issue as the tenancy is rescinded (if it is in breach of mortgage agreement) or the tenants are left in place and it is sold as an "investment".

How do I know this? Well, I'm a chartered surveyor and I formerly specialised in insolvency, advising banks and other lenders on how to exit lending relationships! What goes around comes around.....................

Oh, and what makes me laugh is borrowers' insistance that the banks will not aggressively attempt to recover their mortgage assets. They seem to be ignorant of the fact that the UK has probably the most lender-friendly laws in the world. Surprisingly, there seems to be little discussion of this on the HPC forum.

VoR

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Thank you, VoR for being the VoR on the auction sales.

They seem to be ignorant of the fact that the UK has probably the most lender-friendly laws in the world. Surprisingly, there seems to be little discussion of this on the HPC forum.

Because many of the posters on here hate the banks as much as they hate everything else (BTL investors, EAs, Gordon Brown, Margaret Thatcher etc.). So why should they post that the banks are in luck?

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Hi all - first post.

Don't worry about all the empty new build flats - the government has the solution ready and waiting up its sleeve.

After diverting loads of extra cash towards new supply of affordable housing, which due to lack of sites and slowing private developments is going to be a struggle to spend in much of the country - subtle moves have already started.

The Housing Corporation, the current and funding and regulatory body for housing associations has started to make noises about how they would welcome off the shelf purchases of new build properties by housing associations - obviously part-funded by public money, the rest coming from association's private reserves and lending on the private market. The housing association lending market is considered low risk and associations are still able to access fairly low rate loans currently.

Some issues though - most new builds do not reach the minimum quality standards demanded by the Housing Corporation. I fully expect waivers to be given though around this issue as the Government struggles to deliver its numbers.

Most of the properties are small one and two bed units.

A clear repeat of the early 90s when those who bought their aspirational city living and waterside apartments suddenly found that there exclusive development wasn't quite so exclusive after all.

Not huge take-up yet by housing association's but they are already being offered units at discount by developers. The discounts on offer though are apparently not stacking up for associations currently. As discounts offered get meatier as desperation sets in watch for vast swathes of newly developed unsold homes being snapped up by housing associations and counted in the government's plan to deliver 170k new affordable homes in the next 3 years.

Edited by All Over Now

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Wow - he's got his own tramp...posh b@stard!!!

Ask him if he'd also like his own real live hermit - I'll do it for 25k, as long as I can have Tuesdays off.

Oh, and Sky TV and broadband in my cave...

Sorry, the tramp won't have it.

He urinates in the basement and there's nowhere else you could conceivably go.

May I suggest you try Leeds.

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Thank you, VoR for being the VoR on the auction sales.

Because many of the posters on here hate the banks as much as they hate everything else (BTL investors, EAs, Gordon Brown, Margaret Thatcher etc.). So why should they post that the banks are in luck?

I'm not suggesting that the banks are in "luck" at all. My intimation is that banks in possession sell at true market levels, rather than an irrational price level that is set merely to preserve a borrowers actual or notional equity in his house . Accordingly, the more assets that are repossessed and sold in the market, the more likely the average house price will fall, which at the end of the of the day is what this forum is all about.

There are various definitions of market value, although the generally accepted definition is the price achieved between a willing seller and willing buyer, allowing a reasonable amnount of time to market the asset. If the vendor is "not willing", then it cannot be market value. This is why valuers adopting RICS red book valuation methodology are struggling to meet many vendors expectations on pricing. In fact, it is quite possible to argue that the true value of a property can only be reached at auction, as this is the most open and arms-length of selling processes (well, technically speaking, the under bid is the true value, as the wining bidder could be seen to be a "special purchaser" as he is willing to pay more than anyone else, which is specifically excludes from the Red Bookdefinition of market value. I digress......)

Ultimately, whilst Banks can - albeit painfully - absorb huge losses and write downs in it's assets few borrowers can. Therefore the former is more likely to sell at market values than the latter.

Accordingly, and somewhat paradoxically, lender friendly laws will actually benefit most hpc.co.uk devotees. Forget about banks as the enemy - after all, most subscribers to this site will need a mortgage if they were ever to enter or re-enter the market! They sow the seeds of their own success and by extension thier own destruction - sensible and sustainable leverage is a good financial tool for the homer owner and investor. However, when it goes to extremes then it becomes toxic, as we are now finding.

VoR

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Hi all - first post.

Don't worry about all the empty new build flats - the government has the solution ready and waiting up its sleeve.

After diverting loads of extra cash towards new supply of affordable housing, which due to lack of sites and slowing private developments is going to be a struggle to spend in much of the country - subtle moves have already started.

The Housing Corporation, the current and funding and regulatory body for housing associations has started to make noises about how they would welcome off the shelf purchases of new build properties by housing associations - obviously part-funded by public money, the rest coming from association's private reserves and lending on the private market. The housing association lending market is considered low risk and associations are still able to access fairly low rate loans currently.

Some issues though - most new builds do not reach the minimum quality standards demanded by the Housing Corporation. I fully expect waivers to be given though around this issue as the Government struggles to deliver its numbers.

Most of the properties are small one and two bed units.

A clear repeat of the early 90s when those who bought their aspirational city living and waterside apartments suddenly found that there exclusive development wasn't quite so exclusive after all.

Not huge take-up yet by housing association's but they are already being offered units at discount by developers. The discounts on offer though are apparently not stacking up for associations currently. As discounts offered get meatier as desperation sets in watch for vast swathes of newly developed unsold homes being snapped up by housing associations and counted in the government's plan to deliver 170k new affordable homes in the next 3 years.

Welcome & thanks for a well-thought out first post!

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May I suggest you try Leeds.

I did, but the only openings were for Village Idiots - and a couple of hundred BTLetters have already beat me to it...

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They seem to be ignorant of the fact that the UK has probably the most lender-friendly laws in the world. Surprisingly, there seems to be little discussion of this on the HPC forum.

Indeed.

The discussions may increase in the coming months though, as possessions spiral.

And as a good starting point for just how lenders use the law to their advantage - and how to fight back - may I suggest the following site: The UK Home Repossession Page

The site hasn't been updated for some time, but it helped me successfully defend a mortgage shortfall demand that my ex-partner faced in 2002. The tactics they advised paid dividend and they dropped their claim for £5000 after three years of fighting.

Didn't stop her running off with another bloke though... :(

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Regarding the Land Registry recording auction sales (or not).

I would not assume that repossessions (whether sold by auction or otherwise) are excluded from the figures from the Land Registry.

A transfer in exercise of a mortgagees power of sale does not specifically refer to a court order and is really a valid market value for that property.

Transfers referring to a court order tend to include divorces (or other settlements) where the husband and wife end up transferring the house to the wife and is therefore not at a market value.

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  • 295 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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