Buying "New Build" Flats

Morning everyone....

So my fiance and I are looking to take the plunge into the ridiculously over-priced London housing market.  We have found some decent looking "New builds" in our area and I was wondering if anyone has had any luck buying these types of apts.

Basically we are looking at 2-3 Bed Flats in zones 4-6 of London (easily commutable).  The building companies offer the following incentives:

5% Deposit paid
Stamp Duty paid
£1,000 legal fees
£2,000 Bryant Design vouchers towards carpets and curtains

I have heard murmurings that these aren't really deals, as they work them into the cost of the house.  For instance, if the sale price is £250K, that actually the market value of the property is actually 10-20K less than that?  In two-three years time, will we be disappointed to learn that the market value is only £1,000 over our "buying" price?

I know we can't predict how the market will go, but I am just curious if anyone else has taken advantage of such offers and whether the results a few years down the road have been good? 

Thanks!

Great question! I'm interested to know this as well.

Hi Karin!

My initial reaction was 'flippin heck yer going for a new build'?!

Reason being, yes theyre spanking new, yes they're modern and finished and clean and built to standards which means nothing major should go wrong etc, but at THOSE even extra inflated prices?!

However, people like yourself & yer better half are the exact type of person these builds are aimed at and they are priced at the very top end of what current expenditure and income levels people in this demographic can afford.

The property business is exactly that, it's a business, the new build sector has all those offers to entice you in, just like 'half price shoe/handbag/clothes/make up sale' !! and there's a high chance people will 'spend' more as they beleive they're getting more for their money. I'd certainly estimate that the developer is making a tidy 50-75K per flat profit - so the legal fees and stamp duty and 5% deposit can be absorbed by them upfront as they'll make even more money long term through things like the leases etc.

Looking into this a bit further though, I'd suggest you take advantage of these 'offers' if it helps you get your foot on the property ladder. The trick is what currently you wish to do for the mid to long term. Are you looking to stay put and live here for the next 4-8 years or so? any plans of creating sprogs? any other personal situations that are important? - if so factor these in. It sounds as though you are looking to make this your base here, so I'd suggest what I have previously and you go ahead with your plans and not worry 'too' much about what the property market is going to be doing a few years down the line. If you can afford the mortgage and all the associated costs right now then it makes sense to go ahead - the major 'worry' would be if the market went down considerably and you were in significant negative equity, but every home owner in the country is 'scared of that'

There are downsides to 'new build' ownership though,  I've found that the construction isn't as good as it could be for such an 'expensive' purchase, if you end up on a 3rd or 4th floor and the place doesn't have a lift , you're in for some serious excercise (though most new places have em!) and of course noise as even a modest volume level can travel a fair way through these new builds.

Overall though, even if I was loaded enough to the point to buy a new build, they'd not be my first choice unless I thoroughly check out the build for the above points and more importantly, if those extra inflated prices are actually worth it. I understand for many though, ownership and a comfortable new modern place to buy is forefront in requirements - and that's why they do sell quickly!

Good luck! hope this helps a bit!
Cheers! DtM! West London & Slough UK!

Thanks Dennis - I was hoping you would weigh in.

I agree that a new build is probably the most expensive option for the size place we are looking for.  However, we are only looking to get on the property ladder and will probably sell in 2-3 years time.  I don't really want to move into someplace where I have to re-do the kitchen or the bathroom.  I don't want the inconvenience of being without a loo for 2-3 weeks.   That said, we are looking at all sorts of properties at the moment, but the new builds certainly are enticing, as the initial outlay of cash is minimal (No stamp duty, no estate agent fees, no legal fees).  All of what we have saved can now go towards a deposit and lower our monthly mortgage payments.

Funny you should mention the craftsmanship...I was just saying to DF the other day that our generation is building homes without "period" features.  How sad.  I love fireplaces and crown moulding.  I can't wait to buy a nice old family home with these lovely features!  But for now...a shiny new build will suffice.

Dennis - in your humble opinion....
What do you think of the resalability of these new builds.  Do you think they retain their value or even out over time (for arguments sake - assume the market doesn't burst).

Thanks!

Hi Karin,

Lets assume over the next 0-3 years or so the housing market doesnt 'generally' increase or decrease and stays pretty much static. I'd say if you bought a new build now, then in 2-3 years when you sell, it's likely you couldn't value it £10K more than what you paid for it. Other apartments will be sold pretty much at what they were bought at at this time so buyers will naturally go for that one over yours.

However, seeing as nothing is as clear cut when it comes to property - if you were to 'tastefully' update your apartment, say with better kitchen worktops, put in a surround sound system, put in higher quality fixtures and fittings, newer style lights etc etc, then it would increase the 'desirability' of your property and you could ask for a few grand more on top of the price you paid. Hopefully, a potential buyer will bite and be willing to pay your slightly inflated price.

If the market does indeed continue to rise - then say your place was worth 20K more than what you paid for it, and you updated the property, again you could ask that 2-3K on top to cover (or go part way in covering) the time/money you spent on maintaining the place - and even then, you could push the potential out and ask for 5K more or something. Again, hopefully someone will bite when it comes to purchase time.

If the market does go down, then from the value of the property loss, you'll have to take the costs of maintaining the property and use it as more of a selling point to a buyer, but be careful of asking too much as they'll simply go onto the next apartment that's still bog standard.

for the above reasons, I think nowadays buyers shouldn't really be looking to 'gain' out of the properties they buy, although it still is, I can't see values 'continuing' to just keep on rising, even if it is slowly - however stranger things have happened and you just never know!

Please keep a 'get out strategy' if you can - It's what I always would say when talking to clients/our software users on the phone about their money, investments etc. Have you got enough of a backup in case the market does reverse? The slump in the US housing market is directly attributed to the Ease of borrowing money for overpriced properties that happened from around 2000-2001 till now, those people are finding it so hard to keep up with the cost of living increases that have come along with market recovery that they've had to be reposessed. Steer clear of any stupid salary multiplier mortgages, and see if you can scrape up another 5% for the deposit. Also ensure you dont get overstretched on your monthly outgoings with a large proportion going to all the property costs.

I'd suggest searching out places that have already been refurbed that are cheaper, get a good quality inspection done and I reckon that'll save you tens of thousands on the price of a new build. I don't know what or how far out zone 4 and 6 are but I'd think maybe out west as far as Ealing, Wood green, Finchley? if so, there's LOTS of refurbed properties in these type of areas! maybe go check em out?

Cheers! DtM! West London & Slough UK!

Thanks again Dennis.  We are looking at North London any where from East Finchley all the way up to Watford.  We really aren't dead set on one particular area or one particular type of property.  My only real requirement is at least 2 beds.  As I don't want to be forced to move if we have a child. in the next few years. 

Typed up a response but didn't finish and post, came back and DtM said it all much better than me so I wont rehash! 

However, I will back up one comment he made on quality with personal experience.  When I first moved to London I was put up in a corporate apartment for the first 3 months until I found a place to live.  It was new build and I was the first to live in it.  Everything looked great when I moved in but by the time I moved out 3 months later several items were falling apart.  The quality of these new builds is subpar!

New builds are like new cars, they depreciate the day you drive them off the lot.

Just my amateur opinion, ignore as you feel appropriate.

I've experienced that as well. We are renting a new build flat and we were the first to live there. We have been there six  months and things are falling apart left and right. They are covered under warranty, but it still makes me wonder why things are breaking so early. Even still, my husband and I are looking into buying a new build flat and I guess I've just been optimistic in thinking that a different builder might be better. 

Do you know the builder of your current place Sunnyflower?

I should start charging for my 'insider' tips!!!

May I suggest finding the 'new builds' which are conversion type properties. By that I mean things like conversions of older buildings. Although still a new build, often they build up the interiors just that little bit better so as to 'fit with the original' carcass and sometimes walls etc of the original place. I think they're still priced as 'new builds' and any price differential that would've been, had the whole place been built new, is negligable from a buyers point of view. However, compared to other 'new' builds of course the developer may use the fact it's a place that was once a 'bustling Brewery' or 'was a office block' etc to their marketing advantage and load up the price a bit there too.

In the US those trendy Loft's are awesome, and there are a few loft coversions in London, but generally they're very highly priced and not really alot of space and you're only really 3- 4 stories max up seeing as for some inexplicable lack of brain power somewhere insists we don't really build upwards!

If you do find bits are falling apart, you could use some of your 'maintenence' dosh to replace with stronger/higher quality replacement, so when the time comes to sell, they'll be selling points!

Ok Karin, that'll be 100 quid please for consultancy!!

Hope this helps!

Cheers! DtM! West London & Slough UK!

I think I made it clear I was trying to save money Dennis.  Hence going to the unreliable internet as my main source of investigation.   

ha!

alrite, a drink'll do !

Good luck and check out other resources too, more than likely someone will say I've been talkin boll*cks and will insist their way is better! such is the accuracy of this internet thingy!

One more tip, try and get the plans of the flats before you visit, it'll give you an indication of room sizes. Be prepared for the 2nd bedroom to be small. I've seen some 'bedrooms' that you USA people would be ashamed to call a walk in closet in places there!

That might just save you the expense of going to a place and then having your jaw hit the floor when the developer shows you the 'and here's the 2nd bedroom' !!

With that dosh saved, i think i'll settle for 2 drinks!

Cheers! DtM! West London & Slough UK!

Do you know the builder of your current place Sunnyflower?

Rialto....I would probably steer clear of them. 

We live in a new build that isn't so bad...it's been around for about 8 years or so in Cricklewood and other than having to replace the refridge (which was a pain cause it was a built in one with odd sizing) and the heating, it's been okay.