Help - mid new build first time purchase

OldMusicGuy

robtam said:

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

Unfounded anxiety? No, perfectly understandable. Are you being reasonable? IMO no. 20% drop? Offensive IMO. If I were a private seller I would tell you to sling your hook. You are looking like a typical nervous buyer who commits but then changes their mind (and I encountered plenty of them when I was selling last year, too ready to make an offer without thinking it through). You already negotiated a deal you were happy with when COVID-19 was around and now you aren't happy with it. You must have known (especially as a GP!) what the impact of COVID-19 could be. Shows you are a nervous buyer. However, who cares if you offend a developer?   

The likelihood of a price drop in London is high IMO. However, what we don't know is how big it will be and how long it will last. So saying you want 20% off now based on no evidence apart from a few internet warriors claiming (like they always do) we are heading for a property crash is not reasonable behaviour IMO. Sentiment is already turning - look at the headlines today. Lots of talk of schools reopening in May, an alleged plan for getting shops and businesses open soon. Many countries are through the worst. The markets have settled down so for now, things don't look as bleak as they did a couple of weeks ago. I'm sure most big developers don't feel under much pressure yet - they have government financial support available and they can blame poor financial performance on the COVID-19 crisis, so won't be under pressure from investors in the next 3 to 6 months.

This is a test of your negotiating skills. You haven't exchanged, you can do whatever you want. But remember, you knew everything about new build premium, over inflated asking price and COVID-19 when you negotiated your initial offer. That has not suddenly appeared overnight.  

davidmcn

robtam said:

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. 

Would asking for 20% off list price be offensive?

"Offence" doesn't come into it, but it's not realistic when there isn't (yet) any evidence that values have dropped that much. And even if they have, it might simply not be possible - the developer has a bank to repay and will have done their sums based on previous price levels. 

tom9980

Ignoring Covid19 completely i would never recommend a GP buy a 1 bed property with their life before them especially at north of 500k

robtam

OldMusicGuy said:

robtam said:

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

Unfounded anxiety? No, perfectly understandable. Are you being reasonable? IMO no. 20% drop? Offensive IMO. If I were a private seller I would tell you to sling your hook. You are looking like a typical nervous buyer who commits but then changes their mind (and I encountered plenty of them when I was selling last year, too ready to make an offer without thinking it through). You already negotiated a deal you were happy with when COVID-19 was around and now you aren't happy with it. You must have known (especially as a GP!) what the impact of COVID-19 could be. Shows you are a nervous buyer. However, who cares if you offend a developer?   

The likelihood of a price drop in London is high IMO. However, what we don't know is how big it will be and how long it will last. So saying you want 20% off now based on no evidence apart from a few internet warriors claiming (like they always do) we are heading for a property crash is not reasonable behaviour IMO. Sentiment is already turning - look at the headlines today. Lots of talk of schools reopening in May, an alleged plan for getting shops and businesses open soon. Many countries are through the worst. The markets have settled down so for now, things don't look as bleak as they did a couple of weeks ago. I'm sure most big developers don't feel under much pressure yet - they have government financial support available and they can blame poor financial performance on the COVID-19 crisis, so won't be under pressure from investors in the next 3 to 6 months.

This is a test of your negotiating skills. You haven't exchanged, you can do whatever you want. But remember, you knew everything about new build premium, over inflated asking price and COVID-19 when you negotiated your initial offer. That has not suddenly appeared overnight.  

This report from CEBR has appeared in the last week (predicting a 13% drop in prices) . I'd like to think they aren't internet warriors? I guess there is an element of uncertainty - and I think its reasonable to for that to be shared by the home buyer and current home owner - no?

robtam

Sorry Can't post link - but widely reported in the Press. 

Vestraun

More than half a million for a 1 bedroom even in London is ludicrous. Just think about how big a sum of money that is, half a million!

In my opinion, you want to negotiate to a number which leaves you with 20-25% LTV rather than just taking an arbitrary about off, this way you have some cushion from the expected but unknown drops coming down the road. But you need to be prepared to lose this place is the developer doesn’t want to play ball. 

robtam

I think this summarises it well 'expected but unknown'

OldMusicGuy

robtam said:

This report from CEBR has appeared in the last week (predicting a 13% drop in prices) . I'd like to think they aren't internet warriors? I guess there is an element of uncertainty - and I think its reasonable to for that to be shared by the home buyer and current home owner - no?

Look below the headlines. London and the SE (in that report) will be least affected. How much do they forecast the price of 1 bed flats in your area will fall?  They don't know, and nor do you. That's the trouble with using headline figures, they do not relate to the reality of your circumstances.

You've already negotiated 3.9% off the price. The developer would say part of the reason for the negotiation was the looming COVID-19 crisis. The CEBR report is just another "it might happen" report. The developer is not going to say "oh right, based on the CEBR report we'll knock x% off". They want to get the most they can in the current market, and they will be weighing up a number of factors.

Remember you were asking if knocking 20% off was reasonable? The CEBR report (if you believe that) shows you were being unreasonable (it predicts a fall of 11.25% in London). So you've had 4% off already, maybe another 7% reduction would be "reasonable" and as it's not certain, you and the developer being "reasonable" would share the risk by meeting in the middle and agreeing another 3.5% reduction (you split the difference). A "reasonable" solution that is a long way off from 20% off......

Like I said in an earlier post, this is a test of your negotiating skills and your commitment to buying this flat. There's definitely reasons to be uncertain about what will happen in the future, so there are grounds for "trying it on". Maybe this situation is bringing into sharper focus the fact you are stretching to buy a place that isn't (in your own words) "ideal".

robtam

Cheers everyone - update I have called the builders explained my concerns. She explained as I haven't exchanged I'd get my £500 reservation feed back. Interestingly from her perspective house prices won't drop any time soon ... not sure what planet she is on. However, I explained my two options are: 
i. Withdraw and get my £500 back
ii. Enter renegotiations with house builder to mitigate my concerns about volatility of house market - given lock down x2 and unemployment rising. 

Realised I may get my heart broken - but better that than break my bank with negative equity etc

OldMusicGuy

Do let us know how you get on, it will be helpful for others to see if there is some leeway or not, instead of all the nonsense 20% off posts. FWIW we negotiated just under 5% off our new build back in mid-March and we're happy with that. But our position is very different to yours.