With beleaguered builders offering generous mortgage subsidies along with a host of other incentives, new homes present an excellent buying opportunity. Businesslike buyers who reserve before Christmas are likely to get the best deals. Like many companies, developers are desperate to boost their end-of-year sales figures and are prepared to include many tempting extras to win a sale.
New homes already come with certain advantages — modern interiors, energy efficiency, reduced running costs, low maintenance, structural guarantees, better security and even underground parking. Moreover, some developers will work with buyers to make bespoke changes, or provide a complete design-and-build package.
'The tables have turned. The premium for new London flats has disappeared. But it will re-establish quickly'
Traditionally, new homes have cost at least 20 per cent more than comparable homes for sale in the “second-hand” market. During the buying frenzy between 2004 and summer 2007, this differential grew to as much as 40 per cent in new-build hotspots such as Docklands, where investors piled in to purchase off-plan. In Knightsbridge and Belgravia, luxury niche developers, such as Candy & Candy, doubled the going rate for the area, charging more than £4,000 a sq ft.
Now, the tables have turned. While many private sellers can afford to sit tight and wait for the market to recover, cash-strapped developers have to cut their prices — and then cut them again.
“The new-build premium for flats in London has disappeared,” says Richard Donnell of price analysis website Hometrack. “In 2006, the premium was 28 per cent on average but by the second half of 2008 it had dropped to minus three per cent and it is likely to fall further during 2009.”
Jim Ward, director of residential research at estate agent Savills, says: “Typically, new flats are selling for 20 to 25 per cent less than they were at last year’s peak. For most new homes there is now little or no new-build premium. The exception is highly-specified units in prime locations where buyers are prepared to pay extra for a unique home.”
Fewer buy-to-let investors has prompted builders to improve the specification of the homes they produce because owner-occupier buyers tend to be more discerning, often wanting larger flats, according to Russell Taylor, director of estate agent DTZ.
Other commentators warn of a looming undersupply of new homes because of the fall-off in construction activity. This will lead to the new-build price premium being re-established pretty quickly once an upturn in the market begins, predicts David Bexon of the website SmartNewHomes.com. “People who purchase in the current market will benefit from considerable price growth over the next three to four years,” he suggests.
Property search agent Russell Hunt adds: “When prices start picking up there will be a rush on the limited number of new properties, unlikely as that may seem now.” Buyers, he says, should be “ready to pounce when the time is right”, which means knowing exactly what property you want and the realistic price you should pay.
“For serious buyers there is a limited window of opportunity. In the new year, more buyers will come back to the market having made the decision to move or because they want to get on with their lives.”
Tim Kirk, of Bermondsey estate agent Williams Lynch, says the best bargains in 2009 are likely to be among the more modest schemes.
“Next year, some smaller developers, who have been in denial so far, will have to bite the bullet and sell homes they have built at cost price,” he says.
Keeping up with the Joneses
Emma and Christopher Jones used their bargaining power to get a highly individual home at a small development in Isenhurst, Sussex. The couple bought a four-acre plot from Millwood, which builds charming yeoman-style farmhouses in the Kent and Sussex countryside.
The couple got the company to make extensive bespoke changes to the property, including the addition of a “granny annexe” above the triple garage.
Elsewhere, ceilings were raised in height; stone and brick flooring was added to the kitchen, utility room and entrance hall; while a porch and a balcony were completely re-designed.
Millwood is offering a design-and-build service at its latest scheme in Cooden, two miles from Bexhill on the East Sussex coast. Five plots are available, and the firm says it can build anything from a bungalow to a seven-bedroom house with a pool. Call 01732 770991.
‘We’ll never need to move again’
City banker Lawrence Richards and his wife, Deborah, recently moved into a £2.75 million house in Sevenoaks after demolishing their old home on the same plot and using a design-and-build package from specialist builder Millwood. The house has an indoor spa, wine cellar and cinema room.
“Initially, we considered renovating the house but realised there would be too many compromises working with the existing building,” says Deborah.
“It was actually cheaper to build this new dream home. We both have busy working lives so the self-build route wasn’t an option. Millwood handled all the project management, from architecture to finding contractors. Every detail in the house has been customised and tailored to suit us; we never want to move again.”
For more information about Millwood, call 01732 770991.
A chance to wait before you pay
Taylor Wimpey, Britain’s biggest housebuilder, is considering a sale-and-leaseback programme involving 350 show homes in order to boost its working capital.
The buyer would gain a sizeable portfolio and a guaranteed three-year income stream plus eventual ownership of the homes, by which time the housing market could be in recovery.
An institutional investor is the most likely buyer for these home but private individuals with cash or a mortgage in place are also in a strong position to negotiate a deal on single show homes, admits a company insider.