Help - mid new build first time purchase

robtam

Hi can I have some advice.

I’m a first time buyer buying in London with Help to Buy Equity Loan. I have managed to negotiate 3.9% off the list price (including builders contribution to my stamp duty). 

This was about a month ago and since then we have had lock down x2 as advised by HM Government. I’m aware of the risk of property price dropping to as much as 30% which doesn’t bother me as would like to live there for 5 years. 

I haven’t exchanged but the house builders are pushing me to exchange. Is it reasonable to renegotiate the price - and is 10-15% reasonable? I have acknowledged I’m ready to walk away at this point 

Thanks In advance. 

davidmcn

robtam said:

the house builders are pushing me to exchange

Or what? I doubt they have a queue of other potential buyers.

robtam

davidmcn said:

robtam said:

the house builders are pushing me to exchange

Or what? I doubt they have a queue of other potential buyers.

So just refuse to exchange? Or haggle down the price? 

OldMusicGuy

No-one knows if, when, by how much and for how long prices will drop. So saying "is 10% off reasonable" is not a question that can be answered. However, the fact there is uncertainty means there may be deals to be done. There are still people out there looking btw (just check some of the threads on here).

Two things to think about IMO:
- How much are you prepared to lose the property? If you refuse to exchange without a price drop, they might play hardball and refuse to sell. How would you feel about that? Are you happy to stay where you are for a while?
- How desirable is the property? How many unsold properties like it are there on the development? If this is the only one of its kind available, the developers may feel more confident they can find another buyer. What's the position like? Again, if this is the best position on the development, the developer might be less keen to negotiate than if the position isn't as desirable. Also, what's the general availability of similar properties like this in the area? If there's lots of similar properties on the market nearby the developer may be willing to negotiate.

We made an offer on a new build on March 12th before full lock down and got an acceptable deal. But ours was the last house of its type on the development and we aren't going to go back and ask for more off in case we lose it. The property is good value compared to what we have looked at and we will be living there for a long time as we are downsizing, so any temporary blips are irrelevant to us. FWIW two properties were reserved after ours but none have been reserved in the last couple of weeks. 

EDIT: Just re-read your post and you say you are prepared to walk away. So if you want to try it on, give it a go and IMO I would base your reduction on the desirability of your property and the availability of similar property in the nearby area. Or you could just drag your heels a bit to see how things pan out in the next few weeks (our solicitor is being quite slow even though we are keen to proceed). I think construction sites will be one of the first things to be opened up again.

Crashy_Time

Just ask for 20% off.

davidmcn

robtam said:

davidmcn said:

robtam said:

the house builders are pushing me to exchange

Or what? I doubt they have a queue of other potential buyers.

So just refuse to exchange? Or haggle down the price? 

Or both. And/or wait to see what happens to prices. No point negotiating 10% off now and then exchanging, only to see prices fall further.

robtam

OldMusicGuy said:

No-one knows if, when, by how much and for how long prices will drop. So saying "is 10% off reasonable" is not a question that can be answered. However, the fact there is uncertainty means there may be deals to be done. There are still people out there looking btw (just check some of the threads on here).

Two things to think about IMO:
- How much are you prepared to lose the property? If you refuse to exchange without a price drop, they might play hardball and refuse to sell. How would you feel about that? Are you happy to stay where you are for a while?
- How desirable is the property? How many unsold properties like it are there on the development? If this is the only one of its kind available, the developers may feel more confident they can find another buyer. What's the position like? Again, if this is the best position on the development, the developer might be less keen to negotiate than if the position isn't as desirable. Also, what's the general availability of similar properties like this in the area? If there's lots of similar properties on the market nearby the developer may be willing to negotiate.

We made an offer on a new build on March 12th before full lock down and got an acceptable deal. But ours was the last house of its type on the development and we aren't going to go back and ask for more off in case we lose it. The property is good value compared to what we have looked at and we will be living there for a long time as we are downsizing, so any temporary blips are irrelevant to us. FWIW two properties were reserved after ours but none have been reserved in the last couple of weeks. 

EDIT: Just re-read your post and you say you are prepared to walk away. So if you want to try it on, give it a go and IMO I would base your reduction on the desirability of your property and the availability of similar property in the nearby area. Or you could just drag your heels a bit to see how things pan out in the next few weeks (our solicitor is being quite slow even though we are keen to proceed). I think construction sites will be one of the first things to be opened up again.

Thanks the development is now built - and apparently 90% have sold and they are selling everyday. Personally I find that really hard to believe a) as the website isn’t changing at all b) because no one can get surveys c) because the uncertainty in the market. 

Ultimately its a 555k 1 bed flat in London - don’t think many people are going to be that interested in it in the current climate. 

My biggest fear is huge negative equity and being stuck on standard variable rate and unable to remortgage. I’m buying with help to buy equity loan and 5% deposit. 

Cash-Cows

5 years is a short time frame for investing in property. 

robtam

Cash-Cows said:

5 years is a short time frame for investing in property. 

Yes agree I mean I guess the question is how can I best protect myself from the risk 

thinking 
a. Haggle price down 
b. Avoid exchange until uncertainty passes
c. Opt for 5 year fixed term and hope it weathers the storm?

OldMusicGuy

robtam said:

Ultimately its a 555k 1 bed flat in London - don’t think many people are going to be that interested in it in the current climate. 

That's a key point. London is a unique market and I think uncertainty could hit there more than other regions. There are a lot of developments there and a lot of choice, and prices are definitely high compared to the rest of the country. 

House prices have not dropped yet, the market is on hold, and no-one knows what will happen when it unlocks. You need to focus on the desirability of your property and the target market. Is your development in a really desirable area or is it a yuppie ghetto, that is a fancy development that doesn't quite match the demographic of the area? The latter will not be as easy to sell when the market unlocks. Also, who's buying them? Are they the type of people that will be largely unaffected by this or will they be impacted by job losses? 

Planning to stay for five years sounds sensible, but you do have to think about what happens if you are forced to move by a change in circumstances earlier than you want (job change for example). How likely is that? Prices might drop and you could be forced into a move before they have had a chance to recover. How likely would that be? Because your deposit is low (in %age terms, it's not in absolute terms), you are more at risk of experiencing some negative equity in the short term.

The developer is going to be weighing up all of these points as well in deciding how tough to play it with you. 

robtam

OldMusicGuy said:

robtam said:

Ultimately its a 555k 1 bed flat in London - don’t think many people are going to be that interested in it in the current climate. 

That's a key point. London is a unique market and I think uncertainty could hit there more than other regions. There are a lot of developments there and a lot of choice, and prices are definitely high compared to the rest of the country. 

House prices have not dropped yet, the market is on hold, and no-one knows what will happen when it unlocks. You need to focus on the desirability of your property and the target market. Is your development in a really desirable area or is it a yuppie ghetto, that is a fancy development that doesn't quite match the demographic of the area? The latter will not be as easy to sell when the market unlocks. Also, who's buying them? Are they the type of people that will be largely unaffected by this or will they be impacted by job losses? 

Planning to stay for five years sounds sensible, but you do have to think about what happens if you are forced to move by a change in circumstances earlier than you want (job change for example). How likely is that? Prices might drop and you could be forced into a move before they have had a chance to recover. How likely would that be? Because your deposit is low (in %age terms, it's not in absolute terms), you are more at risk of experiencing some negative equity in the short term.

The developer is going to be weighing up all of these points as well in deciding how tough to play it with you. 

Helpful - I’m a GP so job is pretty secure. Quite comitted to the area and think it’s where I want to be. 1 bed flat is a bit smaller than my dream place - but that’s me being fussy. 

It’s in a zone 2 location not the nicest of areas but central and well connected. 

I just want the developer to acknowledge the risk and reduce the price. Appreciate I will have the bare some risk too - and willing too. 

Realistically the market will drop - question is by how much I think ?!?! 

I want to try and safeguard against the new build premium and the over inflated asking price - as together with current situation could leave me very vulnerable. 

Is this unfounded anxiety? Am I being reasonable? Would asking for 20% off list price be offensive?