Sunday, February 1, 2009

Nobody wants to touch new-builds

Lenders now demanding 50% deposits on newbuilds

If you thought it was difficult getting a standard mortgage just now, then try getting one for a newly built home. Some mortgage providers will not lend on a recently constructed place, full stop. Those that do, ask for up to a 50% deposit. Buyers may therefore need a mammoth £100,000 down-payment on a £200,000 home. The Council of Mortgage Lenders blames concerns that new homes may be overpriced and that they may lose value quickly. This problem is exacerbated at present by falling house prices. The surplus of new flats nationwide mean they are even more likely to lose value, it adds.

Posted by little professor @ 03:19 AM (1590 views)
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16 thoughts on “Nobody wants to touch new-builds

  • Really annoys me these studiously naive articles. High deposits are a function of only one variable: house prices still have a huge amount to fall. Once banks are sure that houses prices have stopped falling, the deposit requirements will return to trend. High deposits are purely to limit banks’ exposure to losses still to come over the coming years. Why do none of these pea-brained articles ever state this somewhat obvious fact?

    All this was brought home to me today driving round Wokingham thanks to a road closure and a scenic detour. 2 bed flats still advertised at nearly £300k. Who in their right mind would pay that in 2009 for a newbuild brick shoebox on the edge of a totally humdrum south-east commurter town? The banks are completely right to demand huge deposits, if buyers demonstrate they are stupid enough to buy into this kind of nonsense.

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  • last_days_of_disco says:

    Spot on. But its not just Wokingham. People are *still* holding out with high asking prices. No one can actually bring themslees to admit that it also applies to them. Not just “the market”, a concept it seems that most people think applies to everyone else, not them.

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  • keep saving then when you do have enough of a deposit the bottom would have finally fell out of the market and bingo you will have a nice nest egg to choose “your” property not just the bottom of the market that you thought you would be able to buy.

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  • japanese uncle says:

    300k for student hall!

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  • The banks actually being responsible, saving muppets like Zoe and Alex from themselves.

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  • When no one can afford the deposit, prices must surely fall. This is further evidence of panic from the Lenders who know that steep price falls are around the corner.

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  • This is further evidence from the Lenders that they fear large price drops are around the corner.

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  • Exeter prices are only just starting to fall with developers holding out for peak prices, some are doomed to fail. One barn conversion in the country at £800k is now throwing in a Smart Car valued at £5k. I hope it is a 4X4 version.

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  • I’ve just reserved a new build house. I had to bargain hard but developers are realistic – unlike home owners. They do have some dodgy practices though.

    I had to persuade them to give a me straight discount rather than ‘gifted equity”. I think gifted equity should be banned – it means the price on the land registry is higher than the true price. And buyers pay stamp duty on this ‘gift’. It’s no wonder lenders are wary. They are simply looking for a genuine deposit on top of the developer’s contribution.

    Inflated prices should come to light in the valuation – but developer will pay the valuation fee IF you use their chosen financial advisor. I wonder why?

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  • ” “I like the idea of a newbuild as you can move in without having to buy a new kitchen or bathroom,” Zoe says. ”

    Heaven forbid you should have to make use of a second-hand kitchen or bathroom in a second-hand house. Utter moron.

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  • phd

    Why should you have to make do with a crappy farmhouse kitchen or an avocado bathroom suite ? If a house needs work you have to factor that into it’s value – (it’s value to you the buyer). Sellers always think their house is perfect and doesn’t need any work.

    If buyers don’t fancy new builds they should at least be using this argument to drive down the price of older homes.

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  • luckyjim
    What kind of discount did you get?
    Are you going to change your name to unluckyjim?
    I think you’ve jumped in about 18 months too soon. (unless the discount is huge)

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  • mark wadsworth says:

    @ Luckyjim, I’d ask the same question as justwatching.

    I hope you got about 50% of the original asking price.

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  • This is not a 50% deposit more like 90% based on a realistic valuation!!!

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  • Just a hunch, but the cost of Jim to buy his house probably is about 50% less than peak. 30% of it being made up of reduced interest rates.

    If you do currently have an idle deposit not earning interest in the bank the actual monthly cost of purchase is definately cheaper than renting.

    The dilema is how much of your equity will go over the next 3 years.

    Currently most self employed people will have good books, but in 3 years time it cold be difficult to borrow much based on income then. Likewise for anyone who’s been in continuous employment for several years may find that a bought of unemployment makes it more difficult to borrow in 2-3 years time.

    To that end I can see an arguement for buying a long term family home in a good area now, particularly if it has extension possibilities.

    But no way FTB’s etc.

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  • I’m happy to explain and welcome your thoughts.

    If I don’t change my mind (theres a challenge for ya) I will pay 35% below the brochure price last summer – maybe 25-30% below the true price. Also, STR 2007 is correct, my mortgage payments will be much less than they would have been last year – and less than my rent. Basically I’m buying a house I could not have dreamt of a couple of years ago.

    To put this into context, typical family homes in my area have dropped by no more than 10%. They aren’t shifting but sellers just won’t drop their prices and (unlike developers) are under no pressure to sell. How long will I have to carry on renting waiting for those sellers to come down by another 20% or more ? Will there be many houses to choose from ? There certainly won’t be any more new build houses for a while.

    It’s not a good time to be a saver. The government is printing money. If I lose my job I’ll get no help with my rent (or anything else) until I’ve eaten up all my savings wheras the government will move heaven and earth to help me pay my mortgage. If I lose my job BEFORE I get a mortgage – well I can forget about buying altogether for a few years.

    House prices may not have bottomed out but mortgage rates almost certainly have. I’ve gone for a rate of 4.89% fixed for ten years. I could wait another a year and maybe (just maybe) get the same house for 15% less – but some of that will be offset by higher mortgage rates.

    I’m not trying to convince anyone else here to buy. It’s a personal choice. I’m buying in the knowledge that prices may fall further. My priority is to get my kids settled in school and stop living out of crates. In bricks and mortar terms I’ve taken a huge step up the ladder while keeping my mortgage payments the same. To hold out for more might just be a little bit greedy.

    It’s a little bit like Deal or no Deal. I’ve got two boxes left – £50k and £250k. The banker has offered me £150k and I’ve taken it. Will I need to change my name to unluckyjim ? Depends what is in the last box.

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