Question Re: new Pocket Living HtB flat

jasdev

Morning all,


Here's a new development by micro-flat developer, Pocket Living. (Whose principal remit was always to sell flats at discounted market values to first-time buyers).
https://www.pocketliving.com/projects/development/26

I've got a viewing but the maths make me nervous.


On full property values starting £310k, with Help to Buy the size of mortgage required would be £186k or more.


Following the mandated 4.5x income rule for HtB, I've worked out that I could afford to get a mortgage (pending lender's approval) on any of the available flats.


Using the calculator for Help to Buy London, from the Homes & Communities Agency, I also note that I would be subject to a 45% debt-to-income cap, so the monthly mortgage cost + service charge cost + ground rent could not exceed 45% of my take home pay.
Therefore, on the basis of the interest rate assumptions given by the HCA, I'd need a 37-year mortgage to keep under that threshold.


In the terms of Pocket Living's lease agreements, I gather one is required to sell at a 20% discount to market value, to keep providing affordable homes to first time buyers who live or work in the same borough.
I'd also be subject to repaying the HtB equity loan from year 5 onwards, and repaying that on sale of the flat if I choose to move.


None of this makes me feel warm and happy about purchasing here - but at the same time I feel like I don't want to miss out on an opportunity while I can.
Still, getting levered up on debt and purchasing an illiquid property in a market that seems to be stuttering (and with considerable Brexit uncertainty to the overall economy)... what to do?

Yellow_mango

This makes me nervous too. 45% of take home pay for 37 years and you still wouldn’t own 100% of the property?

You’d be reliant on either substantial salary increases (possible depending on age / profession / career stage) and / or capital increases in property (not something I’d put any reliance in right now) to get anything out of this.

AnotherJoe

It all sounds too complicated to me. Find somewhere else without all the resultant hassle and potential resale issues.
Note also that in a recession / house price fall, single bedroom / studio and "micro flats" and going to be hit the hardest. Add on top it's part ownership and there's a car crash waiting to happen if you need to sell at that point.

onwards&upwards

I don’t really believe the ‘20% discount’ schtick. If the flats have never been on the open market then it’s just 20% less than a number made up by the developers isn’t it?

I wouldn’t touch this with a barge pole but then I don’t have the pressure of trying to find a secure home in London. No chance you could move somewhere where this amount of money would buy you more than an overpriced basic hotel room with some ‘terraces’ that will inevitably just end up as smoking areas?

pattypan4

your gut feeling is telling you jazdev. Run away fast

jasdev

Thanks all!

In an ideal world, I'd rent for long enough to have saved up a sizeable deposit and buy the conventional way.


Will see how that goes!

dimbo61

The song " I living in a cardboard box " comes to mind.
Many lenders will not lend on properties if the size is under a certain m2
London has a crazy housing market.
Love the photos of beautiful clear views of the countryside / parks in Central London.

kingstreet

jasdev wrote: »

one is required to sell at a 20% discount to market value

If this is DOMV (Discounted Open Market Value) as you describe, you can't combine it with HTB Equity Loan.

steampowered

£310k sounds expensive to me for a 1-bed in Ealing.

A quick zoopla shows that you can get a 2-bed house in the area for £290k (https://www.zoopla.co.uk/for-sale/details/51173375) or a 1-bed flat for (https://www.zoopla.co.uk/for-sale/details/50130395).

If you were getting a real bargain it might be worth it. But it doesn't sound like that.

Personally I would go nowhere near. I'd be really worried about being unable to sell
without taking a loss and getting stuck with the property.

Cakeguts

What makes you want to live in a tiny flat in a grotty part of Acton. Ealing and Chiswick it is not. Ealing borough has some grotty bits. Chiswick has some grotty bits.

jonnygee2

These flats are 39 square meters. That's pretty darn small, the smallest flat I ever lived in was 60 sqm, and that was a squeeze.

It is likely to be very difficult to sell. It's really a flat that only appeals to single people on help to buy, but when you sell it it won't be eligible for help to buy. Couples aren't going to live in a space that small, and most people beyond their twenties are not going to want 'social areas'.

As an investment I think it's a non-starter.

You can buy it if, somehow, it's somewhere you really want to live and would be happy living in for a long time. I doubt it is though.