Reserved New Build - Identical House Much Cheaper

MrsKH92

We were very committed to the sale originally but have had some very bad health news recently (not really relevant to the thread so wont go into details - but did make us sort of re-evaluate our lives a bit. It wont affect our income though so wouldn't affect mortgage).

Retired_Mortgage_Adviser

HTB is an interesting space to watch. From April 2021, the current HTB scheme (which is open to non FTBs as well) will be replaced by one that will be restricted to FTBs, plus new regional property price caps will also be introduced.

It shouldn't have a major impact on the scheme (as 81% of all HTB equity loans are to FTBs) but the regional property price caps will be interesting.

AdrianC

Retired_Mortgage_Adviser wrote: »

HTB is an interesting space to watch. From April 2021, the current HTB scheme (which is open to non FTBs as well) will be replaced by one that will be restricted to FTBs, plus new regional property price caps will also be introduced.

It shouldn't have a major impact on the scheme (as 81% of all HTB equity loans are to FTBs) but the regional property price caps will be interesting.

Replacing the current London/Non-London?

Any idea what they'll be?

Retired_Mortgage_Adviser

AdrianC wrote: »

Replacing the current London/Non-London?

Any idea what they'll be?

The below table is as announced in the October 2018 budget, but not sure if it's provisional or final. I would expect there to be intense lobbying going on behind the scenes to move the caps upwards.



For instance, if an HTB price cap of around 225-230k comes in in the north, developers will struggle to sell these kind of properties at the prices they currently fetch.

BelowTheLine

That is an eminently sensible move and would change help2buy completely! But I'll believe it when it's confirmed. There's a new government in place and a long time to go yet for April 2021.

Retired_Mortgage_Adviser wrote: »

The below table is as announced in the October 2018 budget, but not sure if it's provisional or final. I would expect there to be intense lobbying going on behind the scenes to move the caps upwards.

GDB2222

MrsKH92 wrote: »

I do completely agree with you AdrianC - its just good luck that the other family got the house cheaper really but I didnt really about how new builds depreciate so much to start with and then appreciate eventually (my own fault for just getting excited about a house I really liked honestly).

However it has made us think a bit more logically about it all now.

I think you need to consider what your finances will be like in 5 years time, when you want to move. You could look at two examples to get an idea of what's going on:
1. property prices generally rise 25%
2. property prices generally stay the same.


As an example, if property prices stay the same, you'll be selling for £270k say, and you'll have legal and estate agents' expenses of say £5k. So, you'll get £265k after expenses. If you pay £300k, you're looking at a loss of £35k.

You'll pay the government back their chunk, and if you have put down a £30k deposit, that will all be gone. You may have overpaid your mortgage a bit, but otherwise you'll have nothing at all to put down as a deposit on your next purchase.

If property prices rise 25% generally, you'll be selling for £338k, say, less expenses of £5k say. So, you'll have a profit of £33k. That's very nice until you look at the price of your new property, which has also risen 25% to nearly £400k.

The trouble with HTB is that it inflates property prices for new build properties. When you come to sell, your buyer won't be able to get HTB, and you may not be able to sell at a price that's acceptable to you.

The moral of this story, particularly if you are looking at a five year time horizon, is to buy a secondhand property. If you can't manage that without HTB, and decide to buy a new property at a puffed-up price, then at least be aware that you are taking quite a gamble on property prices in your area rising enough to bail you out of what is essentially a bad purchase.

MrsKH92

Definitely wish I had created an account and posted on here before we reserved a property.

It does seem in our situation, buying a new build wouldn't be a very good idea in general.

Still waiting a reply with a final offer (I bet they reply last min today or even on Monday as that's when I said I will decide) but I think our minds are made up. Probably looks like we are being flaky but the health problems recently have been very devastating and although not really relevant to my questions, it's the main reason we started to reevaluate.

Stebani

Honestly, don't worry about appearing flakey or undecided. Buying a house is probably the biggest single financial transaction that you will undertake in your lives so there's no shame in not moving until you are sure.

MrsKH92 wrote: »

Probably looks like we are being flaky but the health problems recently have been very devastating and although not really relevant to my questions, it's the main reason we started to reevaluate.

Stebani

On a serious note, what will happen to new-builds like these if a cap of (say) 250,000 is rolled out up north? Will the developers start building different kind of cheaper flats/homes to fall within the cap, will prices fall for new-build non H2B homes? Or will the H2B buyers just be replaced by open market ones paying similar prices?

OP - sorry for hijacking your thread!

Retired_Mortgage_Adviser wrote: »

For instance, if an HTB price cap of around 225-230k comes in in the north, developers will struggle to sell these kind of properties at the prices they currently fetch.

MrsKH92

That is very true Stebani - I think I really did need to hear that. Thanks