Why is every city centre new build apartment always.....INVESTMENT PURPOSES ONLY?

IAMIAM

Manchester....London......Leeds.....Birmingham.....I would say 75% plus, not for owner occupier. 

BikingBud

Because building them is not about providing homes, it's unashamedly about cash generation.

IAMIAM

I never realised just how many were of this type. If you want to live in the city, you are forced to rent the apartments at 2-3 times the cost of the equivalent mortgage because they won't sell to general public to buy individually.

Section62

IAMIAM said:

Manchester....London......Leeds.....Birmingham.....I would say 75% plus, not for owner occupier. 

At the moment it could be that developers don't want to faff around waiting while owner/occupiers try (and fail) to get a residential mortgage on properties that a big percentage of the population currently wouldn't touch with a barge pole.

...and if there is a line of investors queuing up to buy, why faff around with the difficult ones?

Countrysider

I'm pretty sure they're not investment - only. If you wanted one as an owner-occupier and could raise the finance the developer is not going to refuse your money. 

They are are certainly targeted towards investors though (often overseas investors) as somewhere to park their cash and hope for capital growth. They were never intended as a home for people, but as a home for the world's money in a low interest rate environment. Building more of them will certainly not help the housing crisis, which is why I dislike the simplistic 'we need to build more' narrative of politicians. 

daveyjp

Avoid new builds just in big cities and you can buy as many as you want.

Look at older stock in big cities and you can buy as many as you

However with more Grenfell skeletons to come out of the cupboard it may not be a wise investment.

The inquiry is revealing just how loose regs were interpreted to get the job done.  It won't have been a one off.

AdrianC

IAMIAM said:

I never realised just how many were of this type. If you want to live in the city, you are forced to rent the apartments at 2-3 times the cost of the equivalent mortgage because they won't sell to general public to buy individually.

Care to provide any links? Because I simply don't believe that 2-3x figure... Or the "won't sell".

They may be unmortgageable currently...

Gentoo365

Whenever I read that I assume that there is something that would put off a mortgage lender. 

Maybe they are selling off plan but with onerous terms that would not be suitable for someone needing a mortgage.

As an aside, if they are bought by investors and ultimately rented out they are providing some housing, and if the supply outstrips demand (which is happening to some extent on small flats) prices go down.

Better that investors are buying these (and funding an increase in housing) than buying up existing stock and reducing supply.

IAMIAM

AdrianC said:

IAMIAM said:

I never realised just how many were of this type. If you want to live in the city, you are forced to rent the apartments at 2-3 times the cost of the equivalent mortgage because they won't sell to general public to buy individually.

Care to provide any links? Because I simply don't believe that 2-3x figure... Or the "won't sell".

They may be unmortgageable currently...

Well if a 2 bed apartment is 200k and you take a mortgage out and the payments over 35 years is 500 a month, yet when you rent the same 2 bed apartment you are looking at 1500 a month, 750 each.

K_S

IAMIAM said:

AdrianC said:

IAMIAM said:

I never realised just how many were of this type. If you want to live in the city, you are forced to rent the apartments at 2-3 times the cost of the equivalent mortgage because they won't sell to general public to buy individually.

Care to provide any links? Because I simply don't believe that 2-3x figure... Or the "won't sell".

They may be unmortgageable currently...

Well if a 2 bed apartment is 200k and you take a mortgage out and the payments over 35 years is 500 a month, yet when you rent the same 2 bed apartment you are looking at 1500 a month, 750 each.

@iamiam Out of interest, which city centres have these kind of yields on new build apartments?

I had a client get a mortgage for 2 new-build 2-bed flats in Manchester just last month, they cost around 210k and the rental estimate was only around £900 or so. You also need to account for the fact that owner occupiers need to stump up the monthly service charge which tenants don't.

I don't dispute that it may be cheaper to buy than rent, but not to the extent of many multiples.

AdrianC

£180k (90% LtV) at 2.5% over 35yrs is £650/mo, but over a more normal 25yrs is £810. So we're already down to 185% from 2-300%... Even assuming the £1,500 rent (9% raw yield) is actually correct.

And, of course, that's ignoring the £20k equity required, plus the legal fees and the service charges and the agent management fees and the allowances for voids and bad debts and maintenance. And, of course, a BtL mortgage is at most 75% LtV, so £50k equity, plus higher interest on the borrowing.

So any profit for the landlord is nowhere NEAR what you suggest...

Like I said, any links...?