The crisis in newbuilds. IMO big falls are around the corner which will lead the general market down......
quote : "It cites an example of a new two-bed flat in Nottingham initially valued at £250,000. A second valuation, taking into account prices paid elsewhere in the same development, reduced it to only £170,000- so buyers with big mortgages could wind up with negative equity if they need to sell." Thats an initial overvaluation of over
30%.....the price which some suckers will have paid for it.
Sunday Times
Home Supplement. 11th Dec
Worth what you Paid for it?
Valuers of city flats are accused of rubber-stamping developers' inflated price tags, finds Graham Norwood
Buyers of new city-centre flats may be paying tens of thousands more for their properties than they are worth, according to the Council of Mortgage Lenders.
The CML, whose members handle 98% of UK Lending, accuses some valuers - who should independently assess a property's worth ahead of a mortgage being agreed- of simply rubber-stamping developers asking prices.
It has twice written to the Royal Institute of Chartered Surveyors (Rics) complaining about the problem, and says some valuers failed to consider whether flats were overpriced and may not have known about price cuts secured on similar properties nearby.
It cites an example of a new two-bed flat in Nottingham initially valued at £250,000. A second valuation, taking into account prices paid elsewhere in the same development, reduced it to only £170,000- so buyers with big mortgages could wind up with negative equity if they need to sell. ... Since 2000, there has been a proliferation of such properties. Estate agent Knight Frank says almost 4,000 were built across Leeds, Liverpool, Manchester, Newcastle, and Sheffield in the year to April alone; more are at planning stage or still being built.
Leeds has another 7,000 city centre flats coming on; Manchester has
4,800; Sheffield, 3,300; Liverpool, 4,500; and Newcastle, 1,700. Add "anticipated" development (which may be built after 2008), and there's another 15,000-plus units across these centres.
It is a similar story in Bristol, Birmingham, Nottingham, and Southampton. About 175,000 new homes in London have been approved, but have not yet been started. About 90% are flats, and most are "Turkey Twizzlers": basic two-bed, two bathroom flats, built mainly for buyers who rent to young professsional sharers.
Calculating the real value of these properties can be hard. Developers often try to sell the first ones in the development at full price, to influence valuers assessments of later flats in the scheme. There are also industry rumours that developers have sold first flats to friends and family at inflated prices, again to establish a precedent to influence later valuations.
Those most likely to be lured into paying an inflated price are people buying just one flat, either to live in or to rent. Wealthier, large-scale landlords or professional consortiums are unlikely to suffer: they can secure big price cuts as they buy flats in bulk.
Andrew Smith of Rics dismissed CML concerns as "an unspecified allegation, and as such it is not on the top of our agenda". He was "90% sure" no written complaint had been received, but admitted the issue of "wonky valuations" had been raised by CML at routine meetings. Smith said Rics members follow procedures set out in what industry insiders call the "red book". This says valuations should be based upon a mix of asking prices, incentives and comparisons with similar homes on sale in the second-hand market.
The CML's claim is the latest blow for buyers of such flats. An oversupply has seen prices drop; more falls are predicted for next year, particular in the north, and rental yield forecasts are gloomy.
from yesterday's HOME section of the Sunday Times.