HELP: Negotiating price on a Canary Wharf flat with High Service charge!!

jig

Hi All,

I have viewed a flat in South Quay (Canary Wharf) that fits all my requirements exactly - 2 bedrooms, walking distance to CW, and river views with parking. :beer:

Price and Service Charge
The flat is on the market with two agents; one marketing it at offers in excess of £335k and the other at £350k.

The service charge is high at £3700 and a ground rent of £700!!!

Seller
The seller is a management co (owners of the co are out in hong kong) they have a few flats in the same block, they are advertising two exactly the same but one is one floor higher priced at £360k. They are looking to sell both or let out whatever comes first.

Me (Buyer)
My situation - I'm a FTB with a 20% deposit. Im pretty sure finance wont be a prob. I want to live in the flat for one year then let it out as a long term let or a business let. They paid £410k 2 years back and in 2004 similar falts were selling £250-280k.

What to do? Offering
How much can I offer? and how should i try and steer negotiations? Didnt want to go to high want to think with my head not my heart! At the same time dont wat to get laughed out but want it for the lowest price and prepared to wait..

The service charge seems high? or is this normal for a flat of this price? How can i check?



Thanks everyone in advance for your support,it is a lot of oney and if all goes well will be life changing for me esp in light of my health troubles in the last year..

Robert_Sterling_3

The service charge is what it is. You can not negotiate it. Likewise the ground rent.

QTPie

Can't help with the offer really. Have any others sold in the block recently (look at houseprices.co.uk - although it can be a challenge working out which ones have the same floorplan as you)?

Most people will say that you should get prices down to around "2004" prices, BUT that isn't true for all areas. I exchanged contracts to sell in my area (Bath) for late 2006 prices a few weeks ago and I would LOVE to be able to buy (on the next rung up the ladder) for late 2006 prices!

How long have both flats been on the market? At their current price?

Most people would rather sell than let (less hassle and better to have the release of capital that selling brings).

The service charge, what does it include? Do you have a front desk? Concierge? Lift? Gym? Pool? Communal gardens/terraces? Underground parking? Many London blocks offer quite a lot and price accordingly... I can't vouch for London prices, but my mother lives in a recent build (early 2000s) in Portishead (just the other side of Bristol) and pays £1600/£1800 a year in service charge. Her flats have nothing flash: the service charge covers the lift, cleaning of the communal areas, some communal gardens/terraces, maintenance of the undercroft parking, upkeep of private road/street lighting.

Ground rent is high, but I would imagine that is a London thing (our previous mewshouse, in Bath, had a ground rent of £25 a year).

Service Charges and Ground Rent are a necessary evil if you want to live in a flat like that: you normally do pay over the odds and the rate can rise at any time... We live in a newbuild freehold townhouse that is subject to a service charge (communal gardens, private roads and street lights etc): that has just doubled from about £220 per year to just over £400 a year. I am not bothering to investigate because we just sold the house, but - if I was staying - I would be asking questions...

My suggestions for investigating the service charge are as follows:
- visit some new build flat showhomes in the area (i.e. new flats being built) and enquire about the service charges and ground rents.
- ask any friends who own flats in the area if they would mind sharing what they pay.
- ask the EA selling the property for copies of the past couple of years accounts for the property (i.e. shows what service charge has been charged and how it is spent/apportioned).

At the end of the day, neither Service Charge nor Ground Rent are negotiable... so it depends how much you like the flat as to whether you are willing to put up with it.

Let us know how you get on. Good luck

QT

princeofpounds

re Ground rent and service charge - read the lease carefully and it will tell you what can and can't be charged. Then you should go and investigate the running on the management company, perhaps by talking to other leaseholders and getting hold of their accounts. This will give you an idea of their ability to restrain costs (or otherwise, by the sounds of it!).

You can value the 'cost' of the service charge by assuming it is a rental cost. If a similar flat (ex service charge!) generates x rent for a price of y, then you can use the x/y yield to estimate the 'negative value' of the service charge.

From that you should offset the value of benefits you receive, such as gym membership, insurance you'd otherwise have to pay yourself, how much it would cost you to maintain a similar property yourself elsewhere etc.

Frankly, all this extra calculation will probably be inside the margin of error anyway, and it may or may not be already recognised in the price.

Another way to conceptualise is this - I pay about 18k rent a year for my flat in London (for sake of argument, I'm not giving my details away!). If I buy a similar flat but have to pay that service charge then I am not reducing my 'rental' costs by 100% but only buy 80%. Therefore I would only pay 80% of what the flat would be worth without a service charge.

huntersc

jig wrote: »

Hi All,

I have viewed a flat in South Quay (Canary Wharf) that fits all my requirements exactly - 2 bedrooms, walking distance to CW, and river views with parking. :beer:

Price and Service Charge
The flat is on the market with two agents; one marketing it at offers in excess of £335k and the other at £350k.

The service charge is high at £3700 and a ground rent of £700!!!

Seller
The seller is a management co (owners of the co are out in hong kong) they have a few flats in the same block, they are advertising two exactly the same but one is one floor higher priced at £360k. They are looking to sell both or let out whatever comes first.

Me (Buyer)
My situation - I'm a FTB with a 20% deposit. Im pretty sure finance wont be a prob. I want to live in the flat for one year then let it out as a long term let or a business let. They paid £410k 2 years back and in 2004 similar falts were selling £250-280k.

What to do? Offering
How much can I offer? and how should i try and steer negotiations? Didnt want to go to high want to think with my head not my heart! At the same time dont wat to get laughed out but want it for the lowest price and prepared to wait..

The service charge seems high? or is this normal for a flat of this price? How can i check?

Thanks everyone in advance for your support,it is a lot of oney and if all goes well will be life changing for me esp in light of my health troubles in the last year..

I lived in Canary Wharf in a flat for a while due to it being close to work. I bought the flat for £600k. At best it's worth £300k now, the demand has simply gone from that area. Everyone that can sell has done or is trying desperately to. There was a massive bubble and prices increased to levels that couldn't be sustained. I still have friends in the Seacon Tower and WI Keys, the market is swamped with flats at the moment. One friend of mine lost around £500k in a flat in the Aurora building.

What I'm trying to say is, think VERY carefully before jumping in. If they paid £410k then I'd be loathed to pay more than £250k. I don't even know whether I should be saying that simply because even at £250k I think it would be a bad investment ESPECIALLY if you're looking at it for BTL purposes.

Think seriously about the Wharf and do some good research if you haven't already because I know a lot of people that would sell at 50% of price if they could right now. It's a bit like Dubai, prices went sky high based on the local industry and now everyone's cutting their losses and hoping they can get some money back.

As for your question about ground rent and charges, sounds okay, pretty good actually, all depends on what you get for it but £5k a year is reasonable.

jig

QTPie wrote: »

Can't help with the offer really. Have any others sold in the block recently (look at houseprices.co.uk - although it can be a challenge working out which ones have the same floorplan as you)?

Most people will say that you should get prices down to around "2004" prices, BUT that isn't true for all areas. I exchanged contracts to sell in my area (Bath) for late 2006 prices a few weeks ago and I would LOVE to be able to buy (on the next rung up the ladder) for late 2006 prices!

How long have both flats been on the market? At their current price?

Most people would rather sell than let (less hassle and better to have the release of capital that selling brings).

The service charge, what does it include? Do you have a front desk? Concierge? Lift? Gym? Pool? Communal gardens/terraces? Underground parking? Many London blocks offer quite a lot and price accordingly... I can't vouch for London prices, but my mother lives in a recent build (early 2000s) in Portishead (just the other side of Bristol) and pays £1600/£1800 a year in service charge. Her flats have nothing flash: the service charge covers the lift, cleaning of the communal areas, some communal gardens/terraces, maintenance of the undercroft parking, upkeep of private road/street lighting.

Ground rent is high, but I would imagine that is a London thing (our previous mewshouse, in Bath, had a ground rent of £25 a year).

Service Charges and Ground Rent are a necessary evil if you want to live in a flat like that: you normally do pay over the odds and the rate can rise at any time... We live in a newbuild freehold townhouse that is subject to a service charge (communal gardens, private roads and street lights etc): that has just doubled from about £220 per year to just over £400 a year. I am not bothering to investigate because we just sold the house, but - if I was staying - I would be asking questions...

My suggestions for investigating the service charge are as follows:
- visit some new build flat showhomes in the area (i.e. new flats being built) and enquire about the service charges and ground rents.
- ask any friends who own flats in the area if they would mind sharing what they pay.
- ask the EA selling the property for copies of the past couple of years accounts for the property (i.e. shows what service charge has been charged and how it is spent/apportioned).

At the end of the day, neither Service Charge nor Ground Rent are negotiable... so it depends how much you like the flat as to whether you are willing to put up with it.

Let us know how you get on. Good luck

QT

Thanks QT, good points noted, pls find answers below...

None have sold recently, or are not showing . The flat is in the Seacon Tower in CW.

How long have both flats been on the market? At their current price?
They have only been on for one month at the have been pitched at the current price

The service charge, what does it include? Do you have a front desk? Concierge? Lift? Gym? Pool? Communal gardens/terraces? Underground parking?
Includes all of the above with the exception of pool

I am concerned that the service charges may hike again in which case they are very high and would put me off buying

jig

Thanks all, all good points and food for thought, wee are currently looking at others but the bubble concerns me!

ILW

jig wrote: »

Thanks all, all good points and food for thought, wee are currently looking at others but the bubble concerns me!

No need for racism. Many Greeks make fine neighbours.

QTPie

jig wrote: »

Includes all of the above with the exception of pool

Doesn't sound too bad, to be honest - at least you get some good services for your money

jig wrote: »

I am concerned that the service charges may hike again in which case they are very high and would put me off buying

ALWAYS a risk - you need to factor that in. Quite a lot of people (my Mum, us, other people I have heard) have noticed price hikes in service charges recently. You need a good residents' committee to challenge the charges in that case. BUT, over time, expect them to increase at least a bit (to allow for inflation etc).

If you buy a flat in Central London, then you will probably face expensive service charges at one level or another...

If you go for it, bargain very hard ont he asking price.

Good luck

QT

Doozergirl

jig wrote: »

I am concerned that the service charges may hike again in which case they are very high and would put me off buying

This is also something that concerns me, especially where you're looking at BTL because it's so unpredictable and it affects your yield.

Consider that as the building gets older, the service charge is only going to increase. If it's of high spec, then it's difficult to shop around for contractors and therefore the costs rocket even more. In large blocks it's impossible to self-manage and you are therefore always going to be in the hands of a profiteering managing agent. I never want any part of my home or investment lining someone elses pockets.

http://www.birminghampost.net/news/west-midlands-news/2009/02/26/mailbox-residents-face-ruin-after-service-charge-increase-65233-23013136/
This is the probably the most prestigious apartment building in Birmingham. Repossessions constantly on the market, the service charge has quadrupled since it was built.

I'm sure London and Canary Wharf especially is full of professional corporate let companies. I'm not sure trying to compete with one of those would provide a good business model. Third down on the google search for Seacon Tower is a serviced apartments website.

jig

Doozergirl wrote: »

This is also something that concerns me, especially where you're looking at BTL because it's so unpredictable and it affects your yield.

Consider that as the building gets older, the service charge is only going to increase. If it's of high spec, then it's difficult to shop around for contractors and therefore the costs rocket even more. In large blocks it's impossible to self-manage and you are therefore always going to be in the hands of a profiteering managing agent. I never want any part of my home or investment lining someone elses pockets.

http://www.birminghampost.net/news/west-midlands-news/2009/02/26/mailbox-residents-face-ruin-after-service-charge-increase-65233-23013136/
This is the probably the most prestigious apartment building in Birmingham. Repossessions constantly on the market, the service charge has quadrupled since it was built.

I'm sure London and Canary Wharf especially is full of professional corporate let companies. I'm not sure trying to compete with one of those would provide a good business model. Third down on the google search for Seacon Tower is a serviced apartments website.

Thanks Doozer girl, rates are high and no worried they are going to inc in the future making this very expensive living. I do like the flat very much, but cant justify these high ongoing costs. Is there any way these can be brought down? or way to insure there is no inc for say the next five yrs? (sorry if these are silly qns)

Thanks again to you all