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Are new builds really that bad?? Everyone is warning me off them

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  • DRP
    DRP Posts: 4,287 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I spoke to a plumber who was working on a new build 'town house' in Bury St Edmunds. Now these are not cheap. He was trying to fix a problem with the shower and in doing so knocked a hole through to next door. The party 'wall' was totally inadequate.

    It is this sort of thing that puts me off new builds. I like proper walls, not plasterboard. Better for sound insulation and hanging up pictures!


    a colleague has just bought a newish build (<5 years old) house and he says the same - although in his case it is his 3 kids running about that have put holes through several walls... :D

    I love my victorian terrace - it is light and airy with high ceilings and big bed/rooms and beautiful original moulding. It is double glazed and insulated in the loft and under the floorboards - so is very snug. It has good ventilation from the open fireplaces, yet isn't draughty at all.

    The only problem I have is the long hallway which is a bit of a waste of space and the multitude of cracks in walls and doorframes that open up each winter! :eek:
  • hazyjo
    hazyjo Posts: 15,475 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Would rather buy a purpose built three storey townhouse (actually, my current one's over four!), than convert the loft in a two storey 'normal' one - which still seems to be a popular thing to do (cheaper to extend than move a lot of the time).

    Still two flights to climb, and a room in something that was never intended to be a bedroom. Know things can be adapted to make it a room, but I'd much rather an actual, purpose built floor.

    Saying that, I'm buying a two storey house - but would have considered another townhouse if any I liked were available/affordable. Won't rule out converting the loft in years to come if it turns out to be big enough/feasible.

    Agree, they won't suit elderly/frail people, but no house is going to appeal to every corner of the market.

    Jx
    2024 wins: *must start comping again!*
  • OddballJamie
    OddballJamie Posts: 2,660 Forumite
    1,000 Posts Combo Breaker
    The answer lies in the density - how many houses can be accommodated on a given piece of land. One piece of land say 3 houses @ £300K = £900K, same piece of land 2 houses they would have to be £450K.

    This doesn't make any sense. The cost of building two houses is less than building three, which you haven't included in your example.

    The developers work on profit per plot (overall development), not turnover.

    3 houses @ £300k (build cost £200k) = £900k - (build cost £600k) = profit £300k

    2 houses @ £350k (build cost £200k) = £700k - (build cost £400k) = profit £300k
  • martinsurrey
    martinsurrey Posts: 3,368 Forumite
    This doesn't make any sense. The cost of building two houses is less than building three, which you haven't included in your example.

    The developers work on profit per plot (overall development), not turnover.

    3 houses @ £300k (build cost £200k) = £900k - (build cost £600k) = profit £300k

    2 houses @ £350k (build cost £200k) = £700k - (build cost £400k) = profit £300k

    so wrong.

    to supply infrastructure to a site (so roads, drains, gas, electricity water, phones, fibre) is a pretty much fixed price for the site, regardless of the number of plots (the runs to each plot are insignificant in relation to the main costs).

    also land cost is pretty much fixed.

    Also builders consider the GDV% (so total profit divided by total sales).

    in your example it would most likely look more like this

    3 houses @ £300k (build cost £100k) = £900k - (build cost £300k) less land and infrastructure (£300k) = profit £300k

    2 houses @ £350k (build cost £100k) = £700k - (build cost £200k) less land and infrastructure (£300k) = profit £200k
  • OddballJamie
    OddballJamie Posts: 2,660 Forumite
    1,000 Posts Combo Breaker
    so wrong.

    to supply infrastructure to a site (so roads, drains, gas, electricity water, phones, fibre) is a pretty much fixed price for the site, regardless of the number of plots (the runs to each plot are insignificant in relation to the main costs).

    also land cost is pretty much fixed.

    Also builders consider the GDV% (so total profit divided by total sales).

    in your example it would most likely look more like this

    3 houses @ £300k (build cost £100k) = £900k - (build cost £300k) less land and infrastructure (£300k) = profit £300k

    2 houses @ £350k (build cost £100k) = £700k - (build cost £200k) less land and infrastructure (£300k) = profit £200k
    Even so, building two houses on a plot that could fit three is not going to make the final sale price 50% higher as the build cost of the third house needs to be removed from the equation.
  • lessonlearned
    lessonlearned Posts: 13,337 Forumite
    10,000 Posts Combo Breaker I've been Money Tipped!
    edited 10 April 2013 at 4:46PM
    Thanks Martinsurrey for the detailed breakdown. You are much better than I am at explaining this.

    However what many are missing here is whilst profits count - of course they do - there are other factors which are just as important. After all there are mechanisms to reduce the impact of reduced profits.

    What is crucial, particularly in times of recession, are the annual turnover, the costs and most critically of all - cash flow.

    The construction industry is particularly vulnerable because of all the "up front" costs, development costs, infrastructure, the rising cost of imported materials due to currency fluctuations, delays due to bad weather etc. These all cost serious amounts of money.

    Add to this banks which either refuse finance or supply it at punishing rates of interest. Commercial loans bear no relation to ordinary bank rates. They carry much, much higher rates of interest.

    A development does not reach true profitability until all units are sold. And, when profit margins are reduced it doesn't take much to tip a development into the red.

    Often one development will "carry" another to even out costs, increase cash flow and reduce borrowing.

    I have been parachuted (ok not literally I'm not in the SAS :rotfl:) to rescue what I could from a development which was over-scheduled and over-budget and which hadn't got a snowball in hells' chance of making a profit.

    I was taken off my own development which was selling like hot cakes and which was in fact financing two other developments.

    We had to slow down my own development to allow the build to catch up with sales, and to channel money to keep other struggling developments afloat.

    You will deduce from Martin's breakdown of figures in the example quoted that it is, in fact, the smaller units (houses on small plots in layman's terms) which give the most profitability.

    If you want a nice big house on a nice big plot you are going to have to pay a nice big price. Which brings me back to my point. No-one wants to pay 50% extra for a house on a plot that is 50% larger.

    So if you want a nice new build house with a large garden you are going to have to buy a piece of land and go in for a self build.

    If you want cheaper housing - both new builds and pre-loved - then release more land.

    There are 1m houses standing empty. There are hundreds of thousands of shops, factories, office blocks and warehouses that could be brought into residential use. There are thousands upon thousands of acres of brown field sites crying out to be built on.

    Admittedly some brown field land will be contaminated ie old petrol stations, decommissioned power stations etc and the cost of clean up may be prohibitive.

    The bottom line is we are a small over-crowded island with a serious housing shortage.

    Don't blame the construction industry for high priced new builds.

    Their profits are already at dangerously low levels. Why do you think so many sites have had to be mothballed and workers laid off.

    Blame the planning restrictions. Blame the NIMBYs (See Money's post). Blame the banks for not lending. Blame the lack of good quality trades - a direct result of governments abolishing proper apprenticeships.

    The population is rising fast and we are simply not building enough to meet demand.

    Of course prices are high. They will continue to be high until the shortage of housing stock is addressed.
  • In fact we would be best off concentrating on the root cause. The population problem in other words. But the Government doesn't seem to have the courage to deal with that.

    It's understandable building on the countryside would upset a lot of us and some of us have very good cause to be angry at attempts to cram us all in like battery chickens without our "quality of life" needs and rights respected and many Nimby's are in a position ourselves where we know it simply wouldn't be fair for us personally to have to put up with losing our countryside. But this is a topic for another thread on another board...so I'll go no further down that route.

    Anyway I can agree that shops/factories/office blocks/warehouses on the other hand - now those that are not being used can and should be repurposed for housing and that could be done without upsetting anyone. That's good management and making maximum use of available resources.
  • thedalmeny
    thedalmeny Posts: 235 Forumite
    edited 10 April 2013 at 7:43PM
    I've just purchased a new build property through the latest 'Help To Buy' scheme, we barely qualified due to having zero debt and because my wife isn't working currently (Some part time hours at min wage). It was the best move for me as it let me keep most of my capital in reserve, use 15% interest free 5 year loan for the house and pay it off when my wife has secured work.

    The internet has got to be one of the worst places to read about new build properties, then again, it was always going to be... People rarely bombard the internet posts on how much they love their new home, you'll see plenty when people have issues now..

    I'd only say a few things

    1) Check how long the builder tends to remain on site
    2) Hire somebody to do your snagging (myhammer)

    Providing they're around a decent time to address your issues, you should be fine. Also doesn't hurt to ask other people living on the estate what their experiences have been.

    As for price.. It's a difficult one... Many will say you should expect 10-15% off the price as standard for new builds, which is a little silly to expect. You have to assume that not all estates are going to be grossly overpriced.

    I got 6% off the property with carpets, turf and integration fridge / freezer thrown in.. I feel i got a cracking bargain and didn't push anymore than that.

    When using rightmove to search across the town and a 5 mile radius of where i've purchased it only brought back 10 open market houses of the same size (4 bedrooms and similar sq feet) within the same price range. Out of those i'd say only 2 were ones i'd personally consider on the face of their pictures, the rest were pretty tied looking / old property which required refurbishment.

    I also looked on Zoopla at sale prices on the estate, appears they've been dropping their prices since end of 2010, what most paid is a good 30-40k off the end of phase houses are going for currently.

    So...

    1) Check what house prices are like on the open market within a 5 mile radius
    2) Check what houses have been selling for on the estate over the last 2-3 years

    This will give you a good sense of the 'value' of the home you're looking at buying.
  • lindseykim13
    lindseykim13 Posts: 2,978 Forumite
    Having lived in a new build for 18mths renting it I would never buy one. Although cosmetically they look nice we found it was like being sardines. You can hear the neighbours like they are in your house. The walls are thin internally too so if the kids are playing in the next room you can still make out every word.
    We never found any faults as such-nice big back garden but we had overlooking neighbours in all directions.
    We moved due to neighbours and now in an early 80's house which we are saving to buy.

    They were built by bovis.
  • bclark
    bclark Posts: 882 Forumite
    Having lived in a new build for 18mths renting it I would never buy one. Although cosmetically they look nice we found it was like being sardines. You can hear the neighbours like they are in your house. The walls are thin internally too so if the kids are playing in the next room you can still make out every word.
    We never found any faults as such-nice big back garden but we had overlooking neighbours in all directions.
    We moved due to neighbours and now in an early 80's house which we are saving to buy.

    They were built by bovis.

    So maybe you should say you would neve buy a Bovis home? Not all newbuilds are the same design or quality.
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