Can new homes be overpriced?

bunking_off

Market price is the price that the market will pay. Period. It doesn't matter whether the people that constitute the market are stupid or not (heh, the largest circulation newspaper is the Sun, says it all...). What places sell for - in particular in bulk on new housing developments - is a simple balance of what the builders want versus what buyers are prepared to pay. A £ is a £, whether it came from a stupid or intelligent person's wallet.

So, to answer the OP's question, if the price is the same as similar properties in the area, then as far as the market is concerned it isn't over-priced. The "market", of course, is just an average of people's opinions...clearly there are plenty of people on this thread who are at one side of the spectrum (although if you read elsewhere you'll see many have issues with the price of housing in general). However, as Terrierlady said, if the properties were over-priced, then none would be selling.

Of course, there are three provisos are;

- advertised price is not necessarily sale price...the developer builds some slack into that for you to negotiate with.

- market price now doesn't equal market price in a few months. Even if the market stands still, your new house won't be new any more and this will impact what the market will pay. Personally, with experience of desnagging new builds, I'd say a 6 month old property that's still under warranty and has been sorted represents a better bet. That said, my own experience is that those who say new-builds always devalue relative to the market are just plain wrong. Some may, but I know of plenty locations (especially where the estate becomes the "posh" one for the area) where the reverse is true. I can point to estates within 2 miles of one another that originally sold at the same price, but now have 10-15% differential.

- There's then the issue of whether the market as a whole will stand still, go up or go down...there's plenty of other threads about that.

whambamboo

bunking_off wrote:

Market price is the price that the market will pay. Period. It doesn't matter whether the people that constitute the market are stupid or not (heh, the largest circulation newspaper is the Sun, says it all...). What places sell for - in particular in bulk on new housing developments - is a simple balance of what the builders want versus what buyers are prepared to pay. A £ is a £, whether it came from a stupid or intelligent person's wallet.

Yes people might be prepared to pay it for a new property because of marketing presentations and glossy brochures. But when you come to sell it, the shiny brochures have gone, etc., it had better not cost more than the other properties in the area. Just because people are prepared to pay £x more for the property now, it doesn't mean they will want to when the property is not a new development.

Again, they might find *someone* to pay £500k for that flat in Woking. But the owner is unlikely to be able to resell it at that price.

pigeonpie

Spare a thought for those of us who have to live in the 'joys' of London where £225 000 buys you a 1 bed flat! :eek:

A downstairs loo is a great idea; so is a shower room.
What's with the new Kent - London train links? OH works in Docklands (sadly no, not one of those outrageously paid jobs) and we are in SE London as the trains from Kent all were slow and crawled into Charing X. OH's boss drives to work as it's quicker! :rolleyes:

We are going through the agonies of overpaying too; it's an awful feeling when you know something isn't worth that much but if you don't pay it, someone else will and you won't get the house.
good luck.
oh you can always nuke a loo and reinstate it if needed as long as you leave the evac pipe in place. I'd rather have too many than too few.

mi-key

I'd say the majority of buyers are stupid - how many actually look at what something costs, rather than what it costs them per month ? - this is exactly why catalogues, car dealers etc... make a big point of advertising the fact it will 'only cost you X amount per month', even though you are paying through the nose for interest.

Without having a dig at people on here, new builds ( especially the cheaper crammed estates of small houses that seem to shoot up everywhere now ) seem to appeal to a certain type of buyer - they generally have a newish car ( on finance ), lots of nice clothes ( on the credit card ) and take posh holidays ( on a bank loan ). Basically the sort of people who couldnt dream of getting any sort of deposit together by saving, or pay in cash for furniture - they want an instant way of getting a house, and dont stop to think if it is actually value for money - the builders know this, which is why they offer those 'move in for £99' deals, and the price of the house includes carpets, curtains, furniture etc...

Friends of my wife have just paid £229K for a poky 3 bed terrace townhouse ( one of those 2 storey ones with most of the ground floor taken up by a garage ) in a not that nice area - why ? because they think that if it looks like page 23 of the Ikea catalogue, it must be good. Doesnt matter that for the same price they could have bought a bigger 3 or 4 bed 1930's semi in a much nicer area, with a proper garden rather than 6 square feet of lawn.

It also has one of those mortgage deals through the builders where the repayments are something silly like £500 per month for the first year, then go up to some huge amount - OK, they can afford £500 now, but in 12 months time those repayments are going to more than double.

They have no money, yet both drive new cars ( in fact the husband doesnt drive his in the week because he cant afford the loan payments on it and petrol ! ) go on holiday to Mauritius, and are typical of the social climbers that keep banks and credit card companies in business.

Weggy

KentAde wrote:

Hi Folks,

Myself and my wife are looking at taking out a 97% mortgage on a brand new property in Greenhithe in Kent (close to station and 5mins from Bluewater shopping centre). The property is a 2-bed for £230K. The floor plan is below(Yew).

Should all new homes be market price, i.e. they are not overpriced?, as wouldn't want to fall into negative equity in few years. I've checked 'house price' websites and other new-ish homes seem to be around that price for the specification, but just wondered if there was some legal requirement about new house prices?

Cheers.

Ade.

http://www.waterstonepark.co.uk/assets/pdf/houses/Maple_Yew_A3v3.pdf

Hi.

I work in London, but live in Sittingbourne, Kent. Just as a guide, we're currently looking to move and have found a 5 year old house, on a newly built area, 3 bedroom, garage, and it's on for £175k. I'd seriously look at living further out - it's worth it as you get so much more for your money. Train for me takes an hour from here.... this will improve when the high speed link opens.

bunking_off

Mi-key : Wouldn't necessarily disagree with you in some instances, but where I do disagree is in the sweeping generalisations in this thread.

On the estate I live in, a large majority of the people who are moving are doing so because they've come to the end of fixed rate mortgages and their costs have spiralled (call it inside information, my missus is neighbourhood watch co-ordinator & local Avon lady so gets all the goss). As an avid watcher of Rightmove - what can I say, I just love nosing through other people's houses - I can categorically say that the asking price for their properties have moved absolutely in line with the rest of the market, and also the estate has more "sold" than "for sale" boards so their not setting unrealistic prices. So, in this context you're right that these people have been sold a dream they can't afford, but the general thrust of argument on this thread that new builds always devalue relative to the market is bunkum (I might add that when I referred to "preferred areas" in my earlier post, the estate with identical houses that's outperformed the market norm isn't the one I live on).

It is inaccurate, however, to say that in all cases new builds are pokey compared to older properties. For the record, my place is approx 2000sq ft, and cost £200k three years ago (NW England, before anyone in the SE starts getting too worked up). I did the analysis at the time, and oft repeat it now, and there is absolutely nothing on the market in this area - other than ex-council properties - which goes anywhere near that size for that money. So, to say you only ever get a shoebox just doesn't hold true. The only downside is the size of plot - my garden's only 50ft x 30ft, and while living here I've got the gardening bug. That's the trade-off you take, however...to get anywhere with "character" or a larger garden for the same money, I'd need to lose about a third of my interior spare.

I'd totally agree that in a lot of cases new builds can be pokey. When we bought ours, a big consideration was that the main bedroom had to take a superking-sized bed, and it's rare to find new builds that can do this. Also, the only reason I can open my car doors is because I have a double garage - though in saying this I think I have the only car on our estate that is ever garaged! Point is, it's rare, not impossible to find newbuilds which are bigger than their earlier counterparts.

mi-key

I agree that you can get decent size newbuilds, but it seems to depend on the area - around me ( in the middle of a city ) space is limited, so I suppose it makes sense for builders with limited ground space to build as many small house and 3 storey ones as possible to maximise their profit.

Round here there are a few estates of decent size newbuilds, but these would cost £300+ for a 3 bed, and most are 4 bed executive houses at £350K and up.

BUT.... most of the areas around me these newbuild estates are going up on are surrounded by traditional 1930's semis, which are cheaper and have a lot more space, and are better built and will probably hold any value better.

In fact, with the house my wifes friends bought, I looked at the estate and thought 'these arent a bad size' - until I realised that what looked like one house was actually two back to back !

RHemmings

bunking_off wrote:

Market price is the price that the market will pay. Period. It doesn't matter whether the people that constitute the market are stupid or not (heh, the largest circulation newspaper is the Sun, says it all...). What places sell for - in particular in bulk on new housing developments - is a simple balance of what the builders want versus what buyers are prepared to pay. A £ is a £, whether it came from a stupid or intelligent person's wallet.

I disagree. The "market" is more than just one house or even housing estate. Let's say that four new housing estates are built on the outskirts of a city. One of the housing estates is painted in special paint that glows in the dark. Viewings are held at night and the potential buyers are spellbound by the glowing houses, and end up paying £20K more for the glowing houses than the other, similar, houses. I would say that the "market" would be all four housing estates, since they are similar houses in a single area. Hence the market price would be averaged over all four housing estates, and the "glowing houses" would be overpriced. In particular, when the buyers found that their paint stopped glowing about three months down the line, the houses would definitely have been overpriced. And then when they discover that glowing paint can be bought for £10 a pot at homebase, even the buyers would be prepared to accept that they were ripped off.

This is a silly example, but my basic point is that while, overall, the price paid for houses is the market value, individual houses can be above or below the average, and therefore be over (or under) priced. I think a "market" extends beyond one housing estate, or type of house (newbuild or old), and hence even a whole newbuild estate could be overpriced as there may be better value houses nearby. And, as in the paint example, the "extra value" that the buyers think they are paying for may not really be worth what they are paying.

RHemmings

mi-key wrote:

I agree that you can get decent size newbuilds, but it seems to depend on the area - around me ( in the middle of a city ) space is limited, so I suppose it makes sense for builders with limited ground space to build as many small house and 3 storey ones as possible to maximise their profit.

I woudl never buy a newbuild house as I want a decent size garden. Even better "decent size gardens, front and rear". I have seen quite a few newbuild estates, and the gardens are tiny.

Weggy

RHemmings wrote:

I woudl never buy a newbuild house as I want a decent size garden. Even better "decent size gardens, front and rear". I have seen quite a few newbuild estates, and the gardens are tiny.

That is often the case, but not always true. Look for corner plots, they often have larger gardens....