Time to shop for new-build bargains?


In the wake of a steep decline in the new-build sector of the UK property market this year, the government is offering fresh incentives to encourage first-time buyers (FTBs) to opt for new-build homes.


[UKPRwire, Sat Sep 13 2008] In the wake of a steep decline in the new-build sector of the UK property market this year, the government is offering fresh incentives to encourage first-time buyers (FTBs) to opt for new-build homes.

Among the incentivizing measures recently introduced are the stamp duty holiday for properties worth up to £175,000, and the offering of interest-free loans to FTBs of up to 30% of the value of a new-build property. Households with an annual income of less than £60,000 can also take advantage of free-of-charge loans for five years on new-build properties.

This loan scheme, called HomeBuy Direct, will be co-funded by the government and developers and will be in place in early 2009. Its terms offer the first five years free of interest, followed by a 3% charge, and then from year 10 onwards a charge based on the Bank of Englandís base rate, increasing annually by RPI (retail price index) plus half a percentage point. If the propertyís value goes down, the developer and the government will share only the sale proceeds that remain after the full mortgage has been repaid, thus protecting the buyer against the risk of negative equity.

There are already similar schemes in place, for example the New Build HomeBuy scheme, available to households earning less than £60,000, which allows for ownership of a new property to be shared by the buyer and a housing association. Housebuilders also offer their own shared schemes which may offer loans of up to 40% of the purchase price.

The overinflated valuation of new-build properties has been a source of concern over the past few years, and tighter guidelines are being introduced to ensure that developers do not hide incentives, a practice which has distorted valuations. The new measures aim to ensure that lenders grant mortgages on an accurate valuation rather than advancing more on properties than they are worth. The Royal Institution of Chartered Surveyors (RICS) is making it mandatory for sellers, builders and developers of a property to disclose to surveyors any discounts or other incentives offered to buyers.

For FTBs looking for a new-build property, the auction house can be a source of excellent deals. In many areas of the UK, the oversupply of speculatively built flats means that many such properties are being sold at bargain prices at auctions (in addition to their low price exempting them from stamp duty), as novice buy-to-let investors have found themselves stuck with properties which they are unable to rent.

Good deals are also to be had from developers, many of whom have seen their profits plunge over the past year and, desperate to unload their excess stock of new-build flats and houses, are agreeing to huge price cuts for buyers with a mortgage and deposit in place.




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