New house premiums
Discussion
Howdy. I'm hoping some of you might have some thoughts on my position. I'm looking, with my wife, to buy a flat in Sussex. We're first time buyers and have been looking at a new build place that we really like, and can just about afford. However, I've been reading about the dangers of buying a new place because of the premium placed upon them, particularly in the wake of the Help to Buy scheme, which we're planning on taking advantage of.
I'm fairly recently self-employed and as such no mortgage companies will even look at me for a couple of years. So the plan is to buy somewhere now using only our deposit and a mortgage on my wife's salary, and then remortgage and hopefully upgrade in a couple of years when I have accounts to show.
I've read however that because of the premium on new builds, if you plan to move out after only a couple of years it can mean that you end up making very little if anything on a property, and can sometimes even lose money.
This danger seems to vary depending on the location. Building will continue around us in the neighbourhood for another couple of years, until around the time we'd be looking to move out/up, and the plans for the site include two more blocks of identical flats. The developer said these will go on sale for more than the current ones but, well, they would say that, right? We worry therefore that why would people buy a used apartment when there are new ones available. The building we're looking at is the first such block in the immediate area, so it's hard to compare price rise patterns to similar properties nearby.
So, am I worrying too much about this? At the end of the day we can afford this place, and we like it. If we do want to move after a couple of years, should we really worry that we might lose a bit? After all, the monthly mortgage repayments will be far less than we pay for rent at the moment.
Alternatively, are new builds a minefield best avoided?
Any thoughts or advice from someone that knows a bit about this kind of thing would be much appreciated.
I'm fairly recently self-employed and as such no mortgage companies will even look at me for a couple of years. So the plan is to buy somewhere now using only our deposit and a mortgage on my wife's salary, and then remortgage and hopefully upgrade in a couple of years when I have accounts to show.
I've read however that because of the premium on new builds, if you plan to move out after only a couple of years it can mean that you end up making very little if anything on a property, and can sometimes even lose money.
This danger seems to vary depending on the location. Building will continue around us in the neighbourhood for another couple of years, until around the time we'd be looking to move out/up, and the plans for the site include two more blocks of identical flats. The developer said these will go on sale for more than the current ones but, well, they would say that, right? We worry therefore that why would people buy a used apartment when there are new ones available. The building we're looking at is the first such block in the immediate area, so it's hard to compare price rise patterns to similar properties nearby.
So, am I worrying too much about this? At the end of the day we can afford this place, and we like it. If we do want to move after a couple of years, should we really worry that we might lose a bit? After all, the monthly mortgage repayments will be far less than we pay for rent at the moment.
Alternatively, are new builds a minefield best avoided?
Any thoughts or advice from someone that knows a bit about this kind of thing would be much appreciated.
Not all new builds are the same - so you need to assess the flat on its merits
If you look at this purchase as a financial investment you may end up disappointed. As a home for you and your other half it could be wonderful.
As you can see, buying property is not as simple as it looks. One man's poison is another's medicine!!
If you look at this purchase as a financial investment you may end up disappointed. As a home for you and your other half it could be wonderful.
As you can see, buying property is not as simple as it looks. One man's poison is another's medicine!!
Condi said:
Not sure why people do pay a premium for new builds myself. Buying used you get more space and character at the same money or less.
Buy what you like and what you can afford, remember you're buying it to live in, not to make money from the outset.
We looked at new builds because of the Help to Buy loan, which is only available on new builds, so we could get somewhere a bit bigger and nicer.Buy what you like and what you can afford, remember you're buying it to live in, not to make money from the outset.
You're probably right that we should just buy to get somewhere we like, but after heading some way down that road now we're trying to second guess all sorts of possible eventualities.
For the foreseeable future property is unlikely to rise in value like it did in the early 2000's. Its your first home and you need to think of it as that, a home and not an investment. If you break even when selling then you have in essence gained nothing over renting but it has been yours, you can do what you like with it, no s
tty landlord etc. If it turns out you make a bit then great. What is the alternative? rent? no point in that if you can buy and the mortgage be the same
tty landlord etc. If it turns out you make a bit then great. What is the alternative? rent? no point in that if you can buy and the mortgage be the same Help to debt, sorry buy, is available for used houses as well as new these days (upto £600k) Would I buy a new build again? Would I fk. Considering what you say I don't think you should either, the developer can do a lot of re-plans in those years meaning what you buy into may not be what you end up with, the social rent % can change too. Can you lose money on new builds? Hell yes, I know a fair few that lost tens of thousands. IMO what you are describing sounds like a recipe for a loss, you will be looking to sell something that is used while the developer is still actively selling new.
k. Considering what you say I don't think you should either, the developer can do a lot of re-plans in those years meaning what you buy into may not be what you end up with, the social rent % can change too. Can you lose money on new builds? Hell yes, I know a fair few that lost tens of thousands. IMO what you are describing sounds like a recipe for a loss, you will be looking to sell something that is used while the developer is still actively selling new.I bought a new build house in Sussex about three years ago. I paid 10% less than list, and also received "free" carpets and turf in the deal. Some neighbours paid even less for the same house, a few months later when the developers wanted to clear out the last couple of units.
I would not consider that I paid any premium over an older house, and whilst the house is rather lacking in character, it has more space, larger rooms and a better design than the older houses we looked at (which is, of course, why we bought it...)
I would not consider that I paid any premium over an older house, and whilst the house is rather lacking in character, it has more space, larger rooms and a better design than the older houses we looked at (which is, of course, why we bought it...)
do you want to live on or adjacent to a building site ? wagons/noise and so on.
schemes always run over, so two years might be three.
you get faults on new builds/snagging. However if the the builders are going to be about you stand a chance of getting them fixed in a timely manner.
I've also been involved in building new build: in fact seeing the market crash and what would have been properties for sale, be turned over to social housing.
I'm not going to be disrectful to that group, because social housing has a purpose and need, but yr nice newly bought flat, might have some right nutters living adjacent who have "uman rites innit bruv" and just live in any old manner and fashion they want to.
schemes always run over, so two years might be three.
you get faults on new builds/snagging. However if the the builders are going to be about you stand a chance of getting them fixed in a timely manner.
I've also been involved in building new build: in fact seeing the market crash and what would have been properties for sale, be turned over to social housing.
I'm not going to be disrectful to that group, because social housing has a purpose and need, but yr nice newly bought flat, might have some right nutters living adjacent who have "uman rites innit bruv" and just live in any old manner and fashion they want to.
austinsmirk said:
do you want to live on or adjacent to a building site ? wagons/noise and so on.
schemes always run over, so two years might be three.
you get faults on new builds/snagging. However if the the builders are going to be about you stand a chance of getting them fixed in a timely manner.
I've also been involved in building new build: in fact seeing the market crash and what would have been properties for sale, be turned over to social housing.
I'm not going to be disrectful to that group, because social housing has a purpose and need, but yr nice newly bought flat, might have some right nutters living adjacent who have "uman rites innit bruv" and just live in any old manner and fashion they want to.
Please listen to this! I took the risk, at one point it paid off but after the umpteen chain fell apart I slashed the price to get rid of the sschemes always run over, so two years might be three.
you get faults on new builds/snagging. However if the the builders are going to be about you stand a chance of getting them fixed in a timely manner.
I've also been involved in building new build: in fact seeing the market crash and what would have been properties for sale, be turned over to social housing.
I'm not going to be disrectful to that group, because social housing has a purpose and need, but yr nice newly bought flat, might have some right nutters living adjacent who have "uman rites innit bruv" and just live in any old manner and fashion they want to.
thole. Thankfully I paid a hell of a lot less than others and walked away with no loss. Bloody lucky though & would never ever buy new again unless it was a small development of 4 or less houses and 100% completed with no fields that could be built on anywhere near.There are risks associated with buying any house, old or new.
We bought a new build in Nov 2010 and are due to exchange contracts for our move today, we will make £38k (17%) on the house in just under 5 years.
All houses are different in this regard, it has to be judged on property, location, personal circumstances and all kinds of other factors.
We bought a new build in Nov 2010 and are due to exchange contracts for our move today, we will make £38k (17%) on the house in just under 5 years.
All houses are different in this regard, it has to be judged on property, location, personal circumstances and all kinds of other factors.
The issue I'm finding is most of the starter homes on developments are way over priced.If you can find one.
Most new developments have 40% social housing, Some of them are shared equity. But the majority of them are housing association. All of them come under the name "affordable housing" Some builders mix them in and other don't. So it really is a one field as such.
Most smaller developments were i am looking tend to be near established homes rather then fields. But makes it difficult to judge an area. When some of the homes are 5 years old.
Most new developments have 40% social housing, Some of them are shared equity. But the majority of them are housing association. All of them come under the name "affordable housing" Some builders mix them in and other don't. So it really is a one field as such.
Most smaller developments were i am looking tend to be near established homes rather then fields. But makes it difficult to judge an area. When some of the homes are 5 years old.
Condi said:
Not sure why people do pay a premium for new builds myself. Buying used you get more space and character at the same money or less.
A new estate of 160 houses has been dropped onto the edge of our village over the last few years with prices that are 25% higher than similar established stuff within the village.Walking around the estate one thing that's noticeable is many of the bigger houses have two recent cars of "prestige" brands. This leads me to think that there's a mentality of wanting shiny things, including the house.
I suppose there are other benefits - there's less likelihood of hassle with the purchase process, the house should be cheaper to run etc.
Parking always looks a nightmare too - especially for the cheaper houses with a random assigned single parking space.
People trying to sell these houses are going to take a massive bath for the foreseeable future and could have trouble with LTV's when their existing deals end.
Dont forget about inflation in your calculations and the cost of buying/selling
...I have a friend who has bought houses, spent his spare time doing them up, sold for £40k more 5 years later and reckons hes "making money" In reality hes had no social life, may as well had a part time job earning a tenner an hour for the time hes spent, and the house value kept pace with inflation ...ok if thats how you want to spend your free time I guess.
The last house we bought in 2007 for £425K ( pretty much at the market peak) needs to be worth £540k now just to have kept pace with inflation. Similar houses are up at £499K or less ...in real terms we haven't even broken even yet on the market which is still down from the last peak (outside of the crazy south east of England)
...I have a friend who has bought houses, spent his spare time doing them up, sold for £40k more 5 years later and reckons hes "making money" In reality hes had no social life, may as well had a part time job earning a tenner an hour for the time hes spent, and the house value kept pace with inflation ...ok if thats how you want to spend your free time I guess.
The last house we bought in 2007 for £425K ( pretty much at the market peak) needs to be worth £540k now just to have kept pace with inflation. Similar houses are up at £499K or less ...in real terms we haven't even broken even yet on the market which is still down from the last peak (outside of the crazy south east of England)
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