All That Glitters Aint Gold
UK off plan marketing is clouding our judgement …
A recent Phenomenon in the UK housing market has been the amount of new build properties appearing in our cities especially in old industrial areas that are being re-generated or re-invigorated. I'm sure we are all aware of sites in our own town or city which have now been turned into a trendy new block of flats or a development of townhouses. This is on top of your usual larger new build developments further out of town often referred to as "barratt style homes" where the developers sell the idea of a new community living in 3-5 bed houses all with off street parking and safe areas for your children to play in. New build properties are great as they offer the buyer the reliable option of buying a property that will not have any of the strains of a 120 year old terraced property. They are often seen as ideal for somebody with a busy lifestyle as they are low maintenance and the inner city properties are often close to areas of work and leisure. The out of town developments will often be located with good road links to attract people who could commute to a number of towns to work However care should be taken when looking for a new build property as they are often marketed very cleverly. Many developers will entice 1st time buyers or landlords by offering large discounts or offering to pay the deposit for the purchaser. When you are offered a large discount or paid deposit (anything over 5% is large) the question that should be asked is "why would they offer me such a deal?" Often the discount is not true, the developers will have inflated the price in the first place so that they can use the apparent financial gift as a selling tool. Don't get me wrong there are often deals to be done, many developers are desperate to shift their property at the end of their financial year or if they have a new development that they need to sink some cash into. But when offered a "deal" just be careful, do some research on properties in that area and their value and look at historic prices, what comparable properties have sold for.
Lenders also tend to be cautious with new builds as they have experienced some creative marketing from developers. They will (99% of the time) only lend on the lower figure out of the purchase price and valuation as they need to see some financial commitment from the applicant and will also be vigilant with the higher priced properties. BTL investors may find that they do get a true discount for a bulk purchase, the developer will benefit from the economies of scale of dealing with one solicitor and one customer, however they need to be aware that if a large percentage of properties within a development are sold to investors then they may well all hit the rental market at the same time and end up diminishing the rental return due to saturation. This can also effect the value of the property if bought as a residence and care should be taken to look at forthcoming nearby developments, you wouldn't want to own the oldest, lowest spec flat within your particular postcode! Also make a note of the maintenance charge associated with the property. They are often around the £1,000 per annum mark that would add £80 a month onto your outgoings. There are some great developments offering modern living in a secure environment, plus the purchasing process can often be simple when compared with dealing with long residential chains. You just need to make sure you do some research into the true value of the property, looking at comparable properties in the area and historical information, it would also help to do this without any emotional attachment to the property affecting your judgement. New Builds are going to keep coming and keep pushing the boundaries in what the properties offer, ie. communal Gym, En Suite rooms, roof top gardens etc, just make sure you do your homework as not all that glitters is gold.
Written by: Ben Saxton
From: http://www.quicksaleproperty.net
Date written: 28/05/2006
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