Many homes struggling to sell on new developments?
If we rewind a few years much of the press was awash with news stories showing queues to buy new homes as soon as they went on sale.
Much of the press are reliant on ads from developers so this cosy love-in was hardly a surprise, though it was based on actual events. Whether that deserved to be covered so heavily was debatable, but feeding the frenzy and your main advertisers is important so it was.
Anyway, that all seems a long time ago now. One thing seen recently is adverts for major developments still on display online months or even years after completion.
It’s probably not a surprise when organisations like Peabody want £280,000 for a small 1-bed flat in Thamesmead opposite Belmarsh Prison. Or you could get shared-ownership and pay rent AND a service charge on top of a mortgage – and be a leaseholder to boot.
If that doesn’t float your boat how about £455,000 for a 1-bed flat in Deptford at the junction of two railway lines? Help to Buy of course. Maybe £635,000 for a 2-bed?
Help to Buy has helped in pushing the price of new-builds up in relation to local market prices. Many buyers havn’t realised they’re in negative equity and the next buyer won’t pay that same premium. Developers have already pocketed the income.
It appears not only have domestic buyers dropped – with many priced out – but overseas buyers have too. Capital controls in China played a part, and now the corona virus is hitting.
Last week we saw just how developers have gained from rising prices and Help to Buy. Persimmon revealed latest results with an average profit of £71k per home. That’s up from £20k profit per home a decade earlier.
Persimmon Profit & Costs Per Plot
Updated with today's results for 2019 pic.twitter.com/yfd6OSLExe
— Neal Hudson (@resi_analyst) February 27, 2020
Still, providing more truly affordable homes is “not viable” at many sites apparently.
Build to Rent
This problem is not only affecting homes for sale but homes to rent under “Build to Rent” which some have heralded as the saviour for housing. Not at these prices.
The Essential Living tower in Deptford still have flats at all sizes available months after completion. Given a 1-bed flat can cost £2,200 a month to rent that’s no big surprise.
The question is how many props will the Government continue to come up with to support the building industry? And how long until the whole thing falls over? For now, many homes don’t appear to be selling even with ever more demand and more people forced into overcrowded homes or living with parents. It can’t go on forever.