New build - good value

[pgtips]

I have the option of buying 'off-plan' for a new property. The thought of being able to spec out the place but without actually doing the work myself is quite attractive. However, assuming no movement in the property market whilst it is being built (i.e. lets assume all other house prices remain the same and I'll take the risk on general house price movement) does a new build typically represent good value for money, relatiev to existing houses? Is there a ruleof thumb here?

All opinions welcome (but before Tuesday morning when I have to decide...)

thanks

[blueg33]

I have spent 20 years as a Director and Managing Director of large housebuilders (I am currently in a different sector of development). So here is my opinion.

As a rule a housebuilder will add a premium top the price of second hand properties revealed in his market research. Every developer I have worked for reckons his product is better trhan the competition and he will adda premium as a result. Further the land market is very competitive (even at the moment) and to win the loand purchase the developer has tro pay the highest price. The land price is affected by selling price of the final product more than anything else.

So as a rule new build is probably not good value.....unless

1. It is the developers year end/half year, then you can get good deals
2. In the current climate he may be looking to turn stock into cash, so again good deals are available
3. The last few plots on a devlopment are a pain in the neck as the developer will want the dite off his books etc

However, you want to buy off plan, this is when you are likely to pay the most premium.

If you pm me your phone number I would be happy to discuss negotiation tactics and the likely stance of the developer in question, when I know who it is. If its one of the right companies I may know the sales Director or Managing Director.

Regards

Nick

Edited by blueg33 on Saturday 29th August 21:25

[sjj84]

Slightly off topic, but related, have you checked with your mortgage provider (assuming you'll be mortgaging). I enquired about changing mine recently and they said that if I get a new build or one that is less than 3 years old I'd need 25% deposit, as opposed to only 10% if it is over 3 years old. They reckon on the prices dropping before stabalising on new builds, no idea how correct that is or if other lenders are the same.

[eldar]

Make sure you get a good deal. Ignore the crap instead of cash bits they may offer, look at the real price. If you have finance in place play hardball, but realistically.

You aren't going to make quick money, unless you are a genius who can read the future, so is it somewhere you want (and can afford to live in) for a few years?

[pgtips]

Thanks for the info. Just a bit more background on the development. Nothing is built at the moment - they are clearing the site. There will be four detached properties (circa £900k each). I'm thinking of buying the first of the four to be built. I'me guessing this will be attractive to the developer as he can then progress with 2 - 4 with cash in the bank on 1: I'm hoping this will play in my favour in pricing. My gut feeling was that the earlier you get into this type of development, the better price (or better value) you can secure.

[blueg33]

pgtips said:

Thanks for the info. Just a bit more background on the development. Nothing is built at the moment - they are clearing the site. There will be four detached properties (circa £900k each). I'm thinking of buying the first of the four to be built. I'me guessing this will be attractive to the developer as he can then progress with 2 - 4 with cash in the bank on 1: I'm hoping this will play in my favour in pricing. My gut feeling was that the earlier you get into this type of development, the better price (or better value) you can secure.

This depends on the size of the developer and the way his finance is structured. I have run specialist up-market developers. They will be conscious of setting a precedent on site values, particularly as sale price information is publically available post completion.

Is it a small or large company? Where is the site? What are the competing developments? How long has he been on site? When did he buy the land? These are all pertinant to the decision making process the developer will use when considering the price. All upmarket developers price the product with a premium, but the premium is more esily recoverable when you sell than with a mainstream volume developer box

[Vron]

I would be wary of the company going bust and you kissing goodbye your deposit before the build is completed in the current climate.

[blueg33]

Vron said:

I would be wary of the company going bust and you kissing goodbye your deposit before the build is completed in the current climate.

Ensure your deposit is held by solicitors as "stakeholders" and have a clause making it returnable if company goes bust. Dont pay deposit as "Agents"

[monthefish]

pioneer said:

pgtips said:

Thanks for the info. Just a bit more background on the development. Nothing is built at the moment - they are clearing the site. There will be four detached properties (circa £900k each). I'm thinking of buying the first of the four to be built. I'me guessing this will be attractive to the developer as he can then progress with 2 - 4 with cash in the bank on 1: I'm hoping this will play in my favour in pricing. My gut feeling was that the earlier you get into this type of development, the better price (or better value) you can secure.

Maybe, but would have thought the opposite - they won't want to establish a low price for the remaining houses?

That would be my concern. This seems more likely \/ \/ \/

blueg33 said:

3. The last few plots on a devlopment are a pain in the neck as the developer will want the dite off his books etc

[monthefish]

sjj84 said:

Slightly off topic, but related, have you checked with your mortgage provider (assuming you'll be mortgaging). I enquired about changing mine recently and they said that if I get a new build or one that is less than 3 years old I'd need 25% deposit, as opposed to only 10% if it is over 3 years old. They reckon on the prices dropping before stabalising on new builds, no idea how correct that is or if other lenders are the same.

Interesting. I'd not heard of that before but I can understand their concern in the current market.

[anonymous-user]

monthefish said:

sjj84 said:

Slightly off topic, but related, have you checked with your mortgage provider (assuming you'll be mortgaging). I enquired about changing mine recently and they said that if I get a new build or one that is less than 3 years old I'd need 25% deposit, as opposed to only 10% if it is over 3 years old. They reckon on the prices dropping before stabalising on new builds, no idea how correct that is or if other lenders are the same.

Interesting. I'd not heard of that before but I can understand their concern in the current market.

I got that one just last week when I saw an advisor in my local Halifax branch. Halifax want 20% deposit rather than 10% if it is a new build.

[blueg33]

guy_spyder550 said:

monthefish said:

sjj84 said:

Slightly off topic, but related, have you checked with your mortgage provider (assuming you'll be mortgaging). I enquired about changing mine recently and they said that if I get a new build or one that is less than 3 years old I'd need 25% deposit, as opposed to only 10% if it is over 3 years old. They reckon on the prices dropping before stabalising on new builds, no idea how correct that is or if other lenders are the same.

Interesting. I'd not heard of that before but I can understand their concern in the current market.

I got that one just last week when I saw an advisor in my local Halifax branch. Halifax want 20% deposit rather than 10% if it is a new build.

New build houses are less of an issue than new build apartments for the mortgage companies. However, if the building society things that the developer is charging a premium then they may down value causing problems late in the transaction.