Clever buyers who purchase a fair-priced home off plan today, with the aim of taking possession when it is ready in three or four years’ time, when the market is moving back up, may prove to be the smart ones.
As there will be fewer houses built, this could drive up the price of those new-builds further.
'Take advantage of the climate to drive a hard bargain'
Many construction sites have been mothballed because of the sales slump but developers are continuing to launch their prime-site new schemes, where apartments are due for completion in 2010 or later.
Volume housebuilders in particular have to keep building and have a forward programme to complete. They predict that no matter how tough the market is now, when these schemes are finished the housing market recovery will be under way and mortgages will be more widely available.
Buyers can certainly take advantage of the current climate by driving a hard bargain, even for homes that are only an artist’s impression.
“Developers are desperate to chalk up some sales, and recognise that they have to be realistic when it comes to prices,” says Andrew Palmer of property consultant DTZ.
“Given the financial wreckage out there it takes courage to buy now but by 2010 we should be emerging from the downturn and at that time there will be a supply shortage because relatively few new homes will have been built in the interim.
“Unfulfilled demand will help drive the recovery.” This is not a reason to speculate, he cautions, but buying off plan can be a sound strategy for owner-occupiers.
'Get any special deal you negotiated included in the contract'
Early buyers have a choice of apartments - size, layout, view - and often get the chance to make changes, some structural, to suit their lifestyle. Another attraction is that developers require only 10 per cent of the purchase price as a deposit, with the balance paid on completion.
But there are pitfalls, too. Developers are quite sophisticated with their marketing and produce seductive computer images of the finished scheme. Buyers may fail to properly consider issues such as size, specification and natural light, which are easier to grasp when walking around a completed home.
“Brochures do not tell the whole story,” says Paul Wright, an independent surveyor. “People have to be careful and evaluate the site inside out. Many inner-city sites are ‘environmentally challenged’ in some way - by noise, pollution or an eyesore building next door.”
When you agree to buy a home off plan, you put down a reservation fee, exchange contracts a month later and wait for completion. Reservation fees are typically £1,000 or £2,000, non-refundable, but the amount is deducted from the deposit you have to pay.
You lose the deposit if you fail to complete the purchase for whatever reason. This is why you must be confident that you can raise the finance to pay the balance.
Developers rarely commit to a specific completion date. When your home is ready, you are given two weeks’ notice to take occupation. This could be earlier or much later than you expected, which can cause problems if you want to synchronise moving in with the sale of your existing home.
And sometimes your new home is handed over even though site works are ongoing. You could ask for a deposit-back guarantee if your home is not ready within a realistic time frame.
Normally, developers prevent buyers from selling on after exchange of contracts and before completion but they may drop this clause if pressed. Virtually all new developments are covered by an NHBC insurance warranty, or equivalent, giving buyers protection against a builder going bankrupt or shoddy workmanship but check before buying.
Get any special deal you have negotiated with the developer (say, wood flooring) included in the contract and ask for a statement of estimated service charges.
Be wary about promised amenities such as a health spa, even car parking. Extras included at drawing-board stage may be abandoned later on. Developers are under no obligation to provide extras unless they are stipulated in your contract. You could find that a new phase of flats sprouts up on a patch of ground earmarked for landscaped gardens.
Five for the future
Fitzrovia Apartments, Bolsover Street, W1: completions from 2010 to 2012
A redevelopment of the Royal National Orthopaedic Hospital providing 110 flats alongside a new medical facility and offices.
It is a joint venture between developers Manhattan Loft and Ridgeford Properties. Prices range from £650,000 to £4.25 million. Call Hamptons International on 020 7758 8477.
Greenwich Creekside, Deptford: completions in 2010/2011
First phase of a long-awaited “creative village” in up-and-coming Deptford. Overlooking the Laban dance centre will be 242 flats in four sleek glass buildings designed by architect Squire and Partners.
This is well-placed for any Olympics dividend. Prices start from £230,000. Call Telford Homes on 0870 872 0987 or agent DTZ on 020 7408 7509.
The Armouries, Woolwich: completions up to 2010 and beyond
A masterplan exists for this part of Royal Arsenal, the former armaments factory, for a riverside estate of several thousand homes that will take another 15 years to build.
The DLR extension arrives in Woolwich in 2010, which is expected to boost the area’s appeal. Prices start from £250,000. Call 020 8331 7130.
Kennington Park Square, Kennington: completions in 2010
A scheme of 200 flats on the site of a former Lambeth council tower block. A deceptively central address, close to the river and in the parliamentary division bell area. Prices start from £267,995. Call Barratt on 020 7476 7163.
Dalston Square, Hackney: completions from 2010
This £160 million regeneration project will create a new town centre with 550 homes, all integrated with the new East London line train station being built at Dalston Junction. Prices start from £264,995. For more information, call Barratt Homes on 020 7241 1833.