House Price Crash Discussion Thread

hartleyinteriors

Thank you for your reply, codger.

I'm almost pleased that you too find the scenario complex - I was beginning to think that I was making it complicated - I have not stopped thinking about this as it is obviously a big decision. This would see us with far less disposable income each month but that was a price we were willing to pay.

In response to some of your questions:

My doubts have been cast really by the media hype at the moment and the uncertainty that there seems to be about 'housing market crashes' and 'recessions'. The city council is 100% behind this development.

Yes, the market price would be as per launch of the development last July however I have already instructed my solicitor to propose negotiations to the developer with the threat of pulling out due to the climate.

The regeneration of the area is by no means small (in essence it is a 1,640,000sq ft mixed-use development -19.5 acres, including offices and 1,391 new homes) and is a partnership between English Cities Fund, English Partnerships, the Southwest Regional Development Agency and the city council. This, the first, residential development is actually being built by the major partner English Cities Fund who have a number of similar regeneration developments around the country. I have put links below of all the sites.

http://www.englishpartnerships.co.uk/millbay

http://www.englishcitiesfund.co.uk/Millbay.php

http://www.southwestrda.org.uk/area-teams/devon/millbay/index.shtm

http://www.plymouth.gov.uk/homepage/environmentandplanning/planning/planningpolicy/ldf/aaps/ldfmillbaystonehouseaap/ldfmillbaystonehouseadoption.htm

http://www.cargomillbay.com


Thank you for your kind advice.

Trollfever

or the development in Portsmouth.

Resale prices of new build flats in Portsmouth are under pressure.

brit1234

hartleyinteriors wrote: »

Yes, the market price would be as per launch of the development last July however I have already instructed my solicitor to propose negotiations to the developer with the threat of pulling out due to the climate.

The price of newbuilds are going to fall quicker than any other property. Reason because banks are only lending to selective people at the moment due to the credit crunch. Due to all the newbuild scams banks look very unfavorably on them especially at the moment.

ixwood

I'd run for the hills and consider myself lucky.

ixwood

brit1234 wrote: »

The price of newbuilds are going to fall quicker than any other property. Reason because banks are only lending to selective people at the moment due to the credit crunch.

..And the cardboard walls. And rabbit hutch dimensions. And massive over supply. And lack of real market. And crazy prices. And..

Ivan_Konstantinov

nelly wrote: »

true though init?

if you fancy the other- google images (with safe search off) corrina femjoy, katie fey and veronica zemanova

I'll see you in a week

wow i didnt even know about safe search stopping me seeing all the good stuff :j

WTF?_2

ixwood wrote: »

..And the cardboard walls. And rabbit hutch dimensions. And massive over supply. And lack of real market. And crazy prices. And..

Yeah, buying a new property is set to become like buying a new car - instant sizeable devaluation the moment you take ownership. It's been hidden in a fast rising market until now.

Personally, I wouldn't buy a 'luxury apartment' except as a pure BTL investment and then of course only when the sums make sense (ie. quite some way into the crash).

codger

hartleyinteriors wrote: »

I have not stopped thinking about this as it is obviously a big decision. This would see us with far less disposable income each month but that was a price we were willing to pay.

In response to some of your questions:

My doubts have been cast really by the media hype at the moment and the uncertainty that there seems to be about 'housing market crashes' and 'recessions'. The city council is 100% behind this development.

Yes, the market price would be as per launch of the development last July however I have already instructed my solicitor to propose negotiations to the developer with the threat of pulling out due to the climate.

The regeneration of the area is by no means small (in essence it is a 1,640,000sq ft mixed-use development -19.5 acres, including offices and 1,391 new homes) and is a partnership between English Cities Fund, English Partnerships, the Southwest Regional Development Agency and the city council.

Hi hartleyi:

Sorry to be a bit late responding (away all day, unfortunately.) Thanks for the links, they certainly helped! My thoughts now (and this is not a 'professional' opinion in any way!) are as follows (bit meandering, but I'm having to rush so typing as I, er, think. . .):

1) Twenty years ago, we were in a slightly (slightly!) similar situation to you. We happened to be in the Lake District ( we lived in the south then) and out of curiosity dropped in on a new-build timeshare project. The only thing we knew about timeshare was that sensible people avoided it. The timeshare was Langdale. We weren't subject to any high pressure selling. We were, however, advised that prices of the first releases would rise in the second phase because by that time, the leisure centre would've been built and various other amenities installed. So. . . if we wanted to buy whilst it was still a building site, that might be A Good Idea. But it was up to us.

We bought. We loved the properties that had already been completed. Our first "week" as also great, even though the development wasn't finished (though the indoor pool was finished by then). True enough, 12 months later, and prices had risen. Two years on, they'd risen again. And so on and so forth. After five years, we sold. The development's amenities and grounds were finished. The place looked gorgeous. We couldn't be bothered to sell privately so we let Langdale sell it for us. They took 50% commission. (Yes. Half.) Yet the cheque we received from Langdale was still 10% more than we originally paid. So. . . we had five years of free holidays in a fantastic lodge-with-waterwheel-and-jacuzzi (that's the life!) and made a profit.

And the reason we made a profit? It was because the project stuck to schedule, and every promise made by the developer was fulfilled. Nobody let us down.


2) Your case is substantially different. But the similarities are relevant, because in our case, there was no question mark over the reality of the promised project completion. In your case -- sadly -- there is. This isn't through any fault of the developer, rather it's to do with today's market place.

3) As you'll see from other posts here by some great MSErs, there is a consensus (which I share) that new-build flats are not -- repeat: not -- the best purchase proposition at a time like this. I won't maunder on with reasons why; if you'd like some illustrations, Google for Leeds city centre development, where a mini-disaster is currently unfolding as it's realised that the market there was fuelled by opportunistic BTLs who screwed up, can't get tenants (too much supply, not enough demand) and so prices are falling dramatically.

4) Your proposed home isn't a city centre development. I appreciate that. And there ought (in theory) to be enough "comfort" in the fact that it's a large-scale project. Ironically though, it's the very extent of that "comfort" which may prove to be a problem, because if the project's time-table goes awry, then that really will impact on the perceived value of the property you're occupying.

But (another but) this is still all crystal balls. I've no idea anymore than anyone else has if the prospect in store for Plymouth is a temporary hiccough or a serious delay to project completion. Or not even a hiccough at all. Not easy.

Yet if there is a credible risk in buying a new-build apartment, there's arguably an even bigger risk in buying one in a project of such scale that it might mean you're living -- and eventually trying to sell a few years down the line -- in what may still, to lesser or greater extent, be a construction site.

5) I posted earlier to someone else that when it comes to buying pretty much anything really, it's as well to bear in mind what happens when it comes to selling. I used to drool over Lancias, and could've bought one. But I knew I'd never sell it. The fact that the particular Lancia I liked was going cheap was in its favour, but even that was outweighed by the fact that I'd need to find one out of maybe a million people who might buy it when I came to sell, compared to my next door neighbour could always stick his Ford Fiesta in the local paper next day and have it sold the day after.

6) Again, there's a consensus amongst wiser heads than mine on MSE in general that 2008 is going to be a tough year. That consensus was reached long before the current alarm bells. So going ahead with the proposed purchase as the deal currently stands means yes, you are taking a double risk:

a) A new-build apartment, rather than a 'traditional' home; and:

b) A new-build apartment in a new-build development, which may get knocked off course by the winds of change

7) Finally. . . There's the question of valuation, because whatever the developer may've estimated at last Spring or early summer, it certainly ain't that now. . .

8) . . . Which means you're currently looking at an LTV of 95% on a property that's currently over-valued and is of a type that not only seems especially susceptible to price falls in this market but is in a development whose overall size may make it susceptible, too, to construction and completion delays.

Well anyway. There you go.

Lots of "mays" and "mights" and "could be's", and nothing definitive at all. But in paring everything down, now that I've read the links (and agree, incidentally: this Plymouth development could be a real showpiece) I'd have to say that you'd be a braver soul than me to go ahead.

I wouldn't risk it. Not because I know the answers to the questions. But because there are just too many questions to have to contend with (but then, I'm 105 and quite time-worn.)

If you do go ahead, then I reckon everyone here would wish you all the luck in the world.

But I guess they'd also, like me, be urging you to cut that LTV back as far as you can by cutting the asking price back as far as you can: if disposable income is being stretched at the moment, it's only going to get even more stretched over the the short-term -- food, fuel, travel, Council Tax: you name it, everything's going up. If that affects you, it also affects damn near everyone else.

And it's the individual and collective worry about that which is one of the various factors exerting a downward pressure on UK property values. . .

. . . That and the fact that in the USA, house prices really are dropping markedly, yet the average cost of a home there is still six times annual income, whereas in the UK that cost is going on for nine. Absurd. If the 'adjustment' we're seeing in the US is anything to go by, Gawd alone knows what kind of 'adjustment' we'll finish up with here in the coming months.

Anyway. That's my fourpennyworth. Sorry to be so hesitant, especially as I understand you're talking about buying a home, not running a BLT business. Buying a home always involves dreams and emotional as well as financial investment -- it's quite natural -- so if I was in your shoes I definitely wouldn't necessarily agree with someone on an Internet thread who has no real empathy because they haven't seen the property, or been round it.

Even so (!) I'd think seriously about doing a comparison check on what might be available elsewhere in the area / city, for a property which isn't as bedecked with as many unanswerable questions as a new-build apartment in an ambitious new-build project.

Maybe do some sums, a bit more leg work, and if you're still enamoured of this particular home, then think about negotiating 20% less -- we bought our current home as a new-build at the end of 2005, on a small, gated development already three quarters sold, and we still negotiated the builder down by more than 10% on the "fixed" asking price. I'd have thought if we could do that with a new-build then in a desirable development, you wouldn 't be flying too high a kite to seek 20% off your new-build now.

As to the seeming "loss" of the deposit -- even though it's tangible at the moment (i.e., it's real cash gone from a real bank account) this is an era when that "loss" can be recouped by paying out less overall than was originally intended when the market was at its height. It all depends, now, on what you do buy. . . which kind of takes us right back where we started.

Sorry not to be more helpful!

KITCHEN1_2

If you feel you 'have' to buy now rather than later ,because you want your own home, then find the 'worst' (needs work) little terrace house in the best area you can find in your locality and negotiate 'hard' ,screw it to the floor on price. Skip the flats ,whatever their future maybe they will not give you the bang for your bucks going forward compared to my proposal and they will definitely give you greater risk to your capital. All of the rational for buying flats is no more than the usual stuff that we all use from time to time to justify why we want to do something (trust me I bought that tshirt more times than I care to remember before I got experienced enough to know better).

Lotus-eater

Good post Codger :money: