Rebecca O’Connor, Property Correspondent
Off-plan buyers have returned to the London housing market and are putting down deposits of thousands of pounds for homes that will not be completed for at least a year, amid a shortage of property for sale in the capital.
Barratt, the housebuilder, said that it has received reservations worth 10 per cent of the full asking price for almost half the flats at its 10 Rochester Row development in Westminster, six months before the launch and a year before the scheme is due for completion.
Pre-sales at Rochester Row, where flats cost between £700,000 and £2.4 million, are the first sign of a revival in buying off-plan since the peak of the market in 2007. Buy-to-let investors who had put down deposits on unfinished properties were among the biggest casualties of the downturn because they were unable to obtain mortgages to complete the purchases and so lost the deposit they had made.
Buying off-plan became less attractive as prices fell because it increased the risk that buyers would find that they had overpaid once the building was complete.
Experts said the re-emergence of the practice was a sign that confidence was returning to the property market as evidence grows that house prices are bottoming out. However, the option is available only to cash-rich buyers because mortgage lenders remain wary of new property, since they are less certain of a home’s true value.
Housebuilders are also cashing in on the rush for cheaper property by raising prices. One insider said: “Where there is good demand and sales are going well, we edge prices up. Not 20 per cent in one go, but we will take steps to see what the market can take.”
The raising of prices will be a blow to first-time buyers considering a new property. Helen Adams, managing director of firstrungnow.com, said: “It might not be up to the builders to help first-time buyers, but it is unfortunate that this is going on at a time when they already have difficulty in obtaining finance and there is a shortgage of property to choose from.”
Developers are also spurring buyers into quick decisions by offering incentives, such as fitted wardrobes, to those committing themselves before the launch.
Intense competition has resulted in the price paid for flats in some Barratt developments in London rising by 5 per cent in the past three months.
Nationwide has reported three months of consecutive price rises of between 1 and 1.3 per cent between May and July.
Savills, the estate agency, said yesterday that the price of prime property in Central London rose by 4.3 per cent between March and June, fuelled by “pent-up demand, an acute shortage of premium stock and improved buyer sentiment”, although it expects price rises to slow again in the autumn.
Research by Marsh & Parsons, the London estate agent, found that the gap between the asking price and the price paid has narrowed from 8.7 per cent in January 2009 to 3.9 per cent in July.
Peter Rollings, managing director of Marsh & Parsons, said: “In the London market, there’s no shortage of buyers with large deposits looking to take advantage of prices that are 20 per cent lower than a year ago in some parts of the capital. Added to that, a chronic shortage of properties for sale has intensified competition among buyers. The result is rising asking prices — and offers to match.” (Rebecca O’Connor, Property Correspondent, The Times) http://www.timesonline.co.uk/tol/money/property_and_mortgages/article6739354.ece
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