What happens when home developers sell for cheap?
Discussion
When I was looking for a new home I considered some new builds. One developer said they were not keen on devaluing their properties to make a sale as it has an impact on others.
However, another development close to them has dropped their prices by over £15k.
What happens to property values overall in the area?
Both developers are selling 3 bedroom homes with similar square footage. One is £520,000 and the developer who has knocked theirs down is £499,950.
According to Zoopla data. Some of those plots selling for under £500k are valued at £550k! With the local average sale being £518k.
It must be infuriating for someone who wants to move out because a buyer could pick up a new home like theirs for £20k less or thereabouts.
Looks like it is the last two plots so the developer is keen to get out hence the price drop. That still means though that at some point someone would have bought a similar home for a higher price.
If that makes sense...
However, another development close to them has dropped their prices by over £15k.
What happens to property values overall in the area?
Both developers are selling 3 bedroom homes with similar square footage. One is £520,000 and the developer who has knocked theirs down is £499,950.
According to Zoopla data. Some of those plots selling for under £500k are valued at £550k! With the local average sale being £518k.
It must be infuriating for someone who wants to move out because a buyer could pick up a new home like theirs for £20k less or thereabouts.
Looks like it is the last two plots so the developer is keen to get out hence the price drop. That still means though that at some point someone would have bought a similar home for a higher price.
If that makes sense...
Developers don't want to sell the first houses on a development at a discount because they set the tone for the mortgage valuers going forwards.
By contrast, the last couple of units will be all profit and after the bank debt has been repaid, so if the developer needs the cashflow for another project they may be willing to discount a little - or not.
loafer123 said:
Developers don't want to sell the first houses on a development at a discount because they set the tone for the mortgage valuers going forwards.
By contrast, the last couple of units will be all profit and after the bank debt has been repaid, so if the developer needs the cashflow for another project they may be willing to discount a little - or not.
Probably even more reasons than that as sales in financial year or quarterly targets may allow for a sharpening of the pencil. Also problem plots may be discounted too.By contrast, the last couple of units will be all profit and after the bank debt has been repaid, so if the developer needs the cashflow for another project they may be willing to discount a little - or not.
worsy said:
loafer123 said:
Developers don't want to sell the first houses on a development at a discount because they set the tone for the mortgage valuers going forwards.
By contrast, the last couple of units will be all profit and after the bank debt has been repaid, so if the developer needs the cashflow for another project they may be willing to discount a little - or not.
Probably even more reasons than that as sales in financial year or quarterly targets may allow for a sharpening of the pencil. Also problem plots may be discounted too.By contrast, the last couple of units will be all profit and after the bank debt has been repaid, so if the developer needs the cashflow for another project they may be willing to discount a little - or not.
The smaller developer may certainly require the cash flow for the next site, the larger one, not so much.
Also on a large site, the question I would ask myself, is why haven’t the last few plots been reserved? Are they problem plots for whatever reason - location, noise etc.
Super_G said:
Would the quick sale (low price) have an impact on neighbouring properties that paid full price though? Or does it level out over time?
It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
It would be a datapoint for AVMs (Automated Valuation Models) used by lenders, but would be lost in the data noise over a longer period. It could make a difference in the short term, though.It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
Super_G said:
Would the quick sale (low price) have an impact on neighbouring properties that paid full price though? Or does it level out over time?
It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
Its a data point, it will have an impact . It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
Ive sold the remaining units in a scheme before at a c40% discount to get out. That will have had an impact on the people who paid full ticket.
I was looking at new builds a year ago, possibly would have moved into one around a year ago.
Did a drive by the other day and they’ve still not finished the pavements or anything like that.
Wire fences up. Social housing just round the back with 3 yards of gravel and raised drain covers etc between street and their parking spaces with triangle wooden blocks to smooth ingress and egress.
This is £600,000 5 bed jobs in N Yorks on a Harron Homes plot.
A year.
Still felt like a building site.
So values of these houses wrt resale ease, correct value etc, seems a very fluid concern given the sites may not be finished for years to come.
Did a drive by the other day and they’ve still not finished the pavements or anything like that.
Wire fences up. Social housing just round the back with 3 yards of gravel and raised drain covers etc between street and their parking spaces with triangle wooden blocks to smooth ingress and egress.
This is £600,000 5 bed jobs in N Yorks on a Harron Homes plot.
A year.
Still felt like a building site.
So values of these houses wrt resale ease, correct value etc, seems a very fluid concern given the sites may not be finished for years to come.
Mr Whippy said:
I was looking at new builds a year ago, possibly would have moved into one around a year ago.
Did a drive by the other day and they’ve still not finished the pavements or anything like that.
Wire fences up. Social housing just round the back with 3 yards of gravel and raised drain covers etc between street and their parking spaces with triangle wooden blocks to smooth ingress and egress.
This is £600,000 5 bed jobs in N Yorks on a Harron Homes plot.
A year.
Still felt like a building site.
So values of these houses wrt resale ease, correct value etc, seems a very fluid concern given the sites may not be finished for years to come.
It certainly has been tough getting schemes finished...I am dragging one kicking and screaming across the line at the moment.Did a drive by the other day and they’ve still not finished the pavements or anything like that.
Wire fences up. Social housing just round the back with 3 yards of gravel and raised drain covers etc between street and their parking spaces with triangle wooden blocks to smooth ingress and egress.
This is £600,000 5 bed jobs in N Yorks on a Harron Homes plot.
A year.
Still felt like a building site.
So values of these houses wrt resale ease, correct value etc, seems a very fluid concern given the sites may not be finished for years to come.
Yes it feels surreal around me at the moment.
That site mentioned has two new developments going up opposite, first few units with people in and entire building sites behind them.
The area generally has lots of supply coming in line.
I get this feeling there are going to be units left unbuilt and/or going very cheap late this year so they can get sites finished.
In any case, I wouldn’t expect to buy any new build today and retain my principal for at least 5 years.
Maybe the SE is different. I think N Yorkshire has tried to pull a SE but it’s going to end in vast over supply and crushing prices in my view.
That site mentioned has two new developments going up opposite, first few units with people in and entire building sites behind them.
The area generally has lots of supply coming in line.
I get this feeling there are going to be units left unbuilt and/or going very cheap late this year so they can get sites finished.
In any case, I wouldn’t expect to buy any new build today and retain my principal for at least 5 years.
Maybe the SE is different. I think N Yorkshire has tried to pull a SE but it’s going to end in vast over supply and crushing prices in my view.
Mr Whippy said:
Yes it feels surreal around me at the moment.
That site mentioned has two new developments going up opposite, first few units with people in and entire building sites behind them.
The area generally has lots of supply coming in line.
I get this feeling there are going to be units left unbuilt and/or going very cheap late this year so they can get sites finished.
In any case, I wouldn’t expect to buy any new build today and retain my principal for at least 5 years.
Maybe the SE is different. I think N Yorkshire has tried to pull a SE but it’s going to end in vast over supply and crushing prices in my view.
Its less likely that there will be discounts because interest rates are so low, even for developers. To hang on for a buyer at a decent level is much more feasible than it was some years ago.That site mentioned has two new developments going up opposite, first few units with people in and entire building sites behind them.
The area generally has lots of supply coming in line.
I get this feeling there are going to be units left unbuilt and/or going very cheap late this year so they can get sites finished.
In any case, I wouldn’t expect to buy any new build today and retain my principal for at least 5 years.
Maybe the SE is different. I think N Yorkshire has tried to pull a SE but it’s going to end in vast over supply and crushing prices in my view.
The big problem is the poor quality of development - quality will stand the test of time, but the s
tboxes put up by many developers will fall as the lack of quality shows through.I think that’s the issue I see though.
Developers hanging on puts buyers off.
Imagine getting your name in for a plot at top price then living without pavements for 3 years.
With big wire mesh fences up all over the shop.
Dust, noise, mud, empty houses.
I literally felt depressed driving around it.
As noted, if you’re in, then at this point I’m these northern developments, you’re stuck now for years until the developments are done... and quite honestly I see a lot getting tidied up just enough and left hanging in limbo.
Developers hanging on puts buyers off.
Imagine getting your name in for a plot at top price then living without pavements for 3 years.
With big wire mesh fences up all over the shop.
Dust, noise, mud, empty houses.
I literally felt depressed driving around it.
As noted, if you’re in, then at this point I’m these northern developments, you’re stuck now for years until the developments are done... and quite honestly I see a lot getting tidied up just enough and left hanging in limbo.
Super_G said:
Would the quick sale (low price) have an impact on neighbouring properties that paid full price though? Or does it level out over time?
It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
Within a development there's usually dfferences due to position, aspect, size of garden, overlooked etc.It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
There was a development dropped on the edge of our village a few years ago and one of the 5 bed houses has just sold for the second time (so now on 3rd owner) and it's still less than it was new. But it's on awkward corner, has a pathway on one side, and a very overlooked garden.
A 4 bed house a few houses away is much nicer positioned, but a large rear garden and not overlooked. That was £400K new - it's just come on the market at £475 which seems way too high, but it's gone SSTC immediately. We know the people in the identical house next door but their's is positioned so their garage is right on the edge of the estate with open pedestrian access to a main road next to it - security would bother me.
Super_G said:
Would the quick sale (low price) have an impact on neighbouring properties that paid full price though? Or does it level out over time?
It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
If they're the last houses in the development that the builder needs rid of (for whatever reason), I doubt they would care. They've made their money on the site and there's evidence from higher value sales of earlier units to support the lower agreed price and not jeopardise the valuation.It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
If there is going to be another impact, the developer will be long gone and on with their next project.
p1doc said:
z4RRSchris said:
Its a data point, it will have an impact .
Ive sold the remaining units in a scheme before at a c40% discount to get out. That will have had an impact on the people who paid full ticket.
OUCH! 40% discount would be killer for couple moved into non discounted housesIve sold the remaining units in a scheme before at a c40% discount to get out. That will have had an impact on the people who paid full ticket.
Mr Whippy said:
I think that’s the issue I see though.
As noted, if you’re in, then at this point I’m these northern developments, you’re stuck now for years until the developments are done... and quite honestly I see a lot getting tidied up just enough and left hanging in limbo.
Plus if you want to sell you will be selling at a loss. Difficult sell when you can still buy a brand new one with every thing brand new, choose your carpets and no doubt some deal on the stamp duty.As noted, if you’re in, then at this point I’m these northern developments, you’re stuck now for years until the developments are done... and quite honestly I see a lot getting tidied up just enough and left hanging in limbo.
Super_G said:
Would the quick sale (low price) have an impact on neighbouring properties that paid full price though? Or does it level out over time?
It’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
I understand properties sold for below market value do not always make it to land registry searchable data. My friend bought a repossession for about 50k under market value. 500k Vs 550k valueIt’s not like the houses are different. It’s the same 3 bed style / lay out but quite a difference in price.
Not listed on land registry
I know another chap who has bought multiple "units" from big household name developers when they just want out. He sits on piles of cash. He pays in cash, property in his name or business name and then he takes out loans. He said the reason this was needed is because if the discounts were known, that then makes the other neighbouring property worth less on paper. So land registry do not publish discounted sales.
I don't know what the exact criteria are for inclusion/exclusion from published data.
MrJuice said:
I understand properties sold for below market value do not always make it to land registry searchable data. My friend bought a repossession for about 50k under market value. 500k Vs 550k value
Not listed on land registry
I know another chap who has bought multiple "units" from big household name developers when they just want out. He sits on piles of cash. He pays in cash, property in his name or business name and then he takes out loans. He said the reason this was needed is because if the discounts were known, that then makes the other neighbouring property worth less on paper. So land registry do not publish discounted sales.
I don't know what the exact criteria are for inclusion/exclusion from published data.
A couple of my neighbours got 20% discount (last few plots, end of financual year and developers had bought the development it as a fire sale so could afford it). Oddly their houses are the only ones appearing on the land registry site. Luckily all the houses are different so there isnt a direct comparison to make.Not listed on land registry
I know another chap who has bought multiple "units" from big household name developers when they just want out. He sits on piles of cash. He pays in cash, property in his name or business name and then he takes out loans. He said the reason this was needed is because if the discounts were known, that then makes the other neighbouring property worth less on paper. So land registry do not publish discounted sales.
I don't know what the exact criteria are for inclusion/exclusion from published data.
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