London: advice needed on discount for new builds

[pawntoc5]

Hello all! My partner and I are looking to buy a 2 bedroom flat somewhere in Zone 3 or 4 of London. We plan on using the HTB scheme and recently we found an interesting flat that matches our criteria. Have done some research on the developer and build quality (eg. reaching out to existing residents of the development; feedback has been positive and seems genuine as far as we can tell). We also like the location - less than half an hour door-to-door to Charing Cross.

We would feel comfortable putting in an offer but are wary of the looming Brexit cloud ahead and its impact on property prices. My question is, how inflated are the prices of new builds in general? Is it realistic to expect us to be able to transact at 10% below list price? List price being around £530k now. Assume here that we arehaving the developer pay the stamp duty as they've expressed willingness to do that.

For additional context, this 2 bedroom we're looking at is the last one they've got to sell in the development so there may be less pressure for them to "maintain the price point" so to speak. We've also checked how much the other 2 bedroom units sold for on the land registry website, but the transacted prices don't look like a good gauge as those units were virtually all sold in 2017 and Q1 2018. Believe the market and buyer sentiment has changed quite a bit.

Also, this isn't one of the big box developers but their track record seems decent. Obviously, every situation differs and there are lots of variables, but considering the above, I just wanted to get a sense from anyone with experience on new builds to see if we could realistically expect to transact at 10% below the list price, which means our offer would have to be c. 15% below and we negotiate towards the 10%. Please let us know if we're way off base here! Thanks so much for any insights anyone can offer.

 

[Nicholas Wallwork]

The price they’ll accept is entirely independant to them. So I’d put in the low offer and gauge from there!

Developers often discount at the beginning and end of a development to either get sales off to a flying
start or indeed close a site out.

I personally think 10% off asking price will be tough as the market is just a bit subdued not crashing badly. In fact I personally think there will be a mini short term boom after Brexit so now could well be the best time to buy!

Also if you’re buying for you and the long term then it shouldn’t matter... Property Investing is all about the long term and short term market fluctuations shouldn’t matter too much provided you don’t have to sell at the low points!

Good luck with the offer!


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[Longterminvestor]

One other thing I would add, how seriously do you want the property? Are you willing to lose the property for the sake of 5% or 10%? Yes, by all means start low but if this is the last property left then try and conclude a deal as soon as possible.

 

[pawntoc5]

All great points, thank you so much! We ended up agreeing to a circa 5% reduction in their price (which, to be honest, already looks like a 5% reduction from the original launch price, as we saw on the land registry that several units of the same type had sold at that much higher pre-reduction price in 2017, when the development just launched). The developer also absorbed stamp duty.

Really appreciate the insights and affirmation about where we should be on this.

 

[pawntoc5]

Developers often discount at the beginning and end of a development to either get sales off to a flying start or indeed close a site out.

This is interesting because I'd heard the opposite as well - that developers are reluctant to drop the price too much for the first few sales as that sets the bar lower for subsequent sales (ie. potential buyers can check the land registry to gauge what price they could actually pay for a similar unit).

 

[diyhelp]

In the boom times they used to offer "early bird" discounts. I would guess that by the time the land registry is updated the majority of the properties will have been sold. So a low starting price to get a few "Sold" boards up should get the ball rolling.