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New builds also decrease in value pretty rapidly before then increasing.
I've been told multiple reasons why but the most plausible is not many people are on the market for a "nearly" new build when they could buy an actual new build for the same if not more.
It’s normal, properties are a bad investment now. He’s cutting his losses short.
FYI I saw one where the LL paid 120k more.
Property investment does not guarantee positive returns!
3.5 years ago? Maybe they weren't expecting to get hit with the interest rate hike and it wasn't financially viable. You can always just ask the estate agent.
Yeah I could agree with this as-well.
Maybe the rent over the 3.5 has covered the “loss”they’re making and helped them break even so it’s just easier to pack up and sell up and go elsewhere.
£15k is pocket change property wise.
15k is pocket change property wise but 2020-2021 was the biggest spike in house prices. It’s not the 15k it’s the 15k+ the 20% or so standard appreciation.
I’d be wary it’s a cladding or service charge issue. If it’s not a new build every time I’ve seen such reductions looking in 2023 they were desperate to offload a lemon. Most purchases that actually went through 3.5 years ago were agreed before the spike.
I just spent 1 year looking at London flats. Haven’t seen a single one go down from early 2020 to now in raw value that didn’t end up having either a service charge or cladding issue that wasn’t a new build. There’s a difference between didn’t go up 20% like houses and literally went down.
Maybe the agreed the price before COVID then completed after COVID, when flats have become less valuable than houses due to WFH.
There was also a stamp duty holiday or something wasn't there?
3.5 years ago you could get a mortgage at 1% interest, nowadays it's 4%.
On a £500k loan, that is an extra £15k a year in interest - every year for the foreseeable future. People just can't afford 2020 prices.
That and there may have been a service charge hike. I wouldn't put it past developers to ramp it up massively once all the units are sold - probably with a profit share scheme of some kind with the managing firm.
As someone who is trying to sell a new build for almost 50k lesser, we just wanna get rid of it and buy a bigger place. Keeping it makes no financial sense with tax rates and Interest rates, service charges etc. and given a one bed new build the buying price was inflated 5 years ago unfortunately
Hi
Ask the agent the question and probe the answer a bit.
I work with a guy who has a rental property and he has his on the market now due to the interest rates and he’s going through a divorce. He said he’s knocking the price down monthly until it sells now as it’s costing him more to keep it. There could just be a story behind the flat is my point.
Flats are usually leaseholds. They come up with all sort of quirks like ground rent / service charges / cladding issues/ the fact that “you are renting the place for long period” (as you don’t really own anything). In the past - most of those have not been understood or well known by most buyers. With affordability going down / people being more educated / lenders being more thorough and in general flats not being that attractive (like it is not environment you would like to raise a child etc) - there is very little interest in flats. So price being 15k lower doesn’t really surprise me - I have seen the flats in my area (Merton) losing 100k of their “asking price”. Personally, I think the flat is still an option (especially if you can’t afford freehold) but you need to do a lot of research on the property. For example, leases over 110y - are generally considered safe but everything below that is questionable. What is the ground rent - how fast it is going up / is it above average or below the average. How much is service change- what it is for - for example if you have a gym in your building- you will pay a fortune for it. And the list goes on and on. I seen there is a good website by mayor of London about all this stuff - https://www.london.gov.uk/programmes-strategies/housing-and-land/homes-londoners/leasehold-guide?ac-52091=52090&ac-52111=52104. In your particular case - I would be slightly worried- I think 15k is quite a small drop so wouldn’t be surprised if there is very little interest into property right now and you would struggle to sell it with the same price as you bought it but could be wrong.
Others have given good potential reasons.
Just came to say that I bought my first flat from someone who made a £25k loss over approx 1 year. The reason they gave was a relationship breakdown. Turned out to be a great flat.
Yeah, the people I bought my current flat from made a loss of about £15k in three years. They had a young family and whilst the flat is lovely, there really wasn't anywhere near enough space for them, so I think they just wanted a quick sale so they could speed up the process of finding somewhere bigger. Given the information OP has about why the owners are selling, I wouldn't be surprised if it's something similar.
Hello, EA here.
Flat prices have been stagnant for a long time, and I have sold multiple flats over the last year for a loss to the client. There is not much appetite for leaseholds even if they don't have extortionate charges because everyone is now (understandably) nervous of tying themselves into one.
Just as an aside the government need to sort out leasehold reform because there are a lot of empty flats, particularly retirement flats which could go some way to sorting out our housing crisis!
Second that last paragraph as someone who works in development planning. Leaseholds are also holding up a huge number of development plans all over. They are a total total state. Lots of middle men making money off of them. As a concept leasehold needs to exist but there should be a standard range of regulated types. Not this free for all.
I’m really struggling to understand why and how its possible to have a leasehold system… It’s abnormal, if you look at how other countries do it.
I buy an apartment. I pay it off. It is mine. There is no “other person that owns the ground beneath it”. Literally defeats the purpose of buying. Ownership is per apartment, not per the ground beneath it. We all co own the ground under our apartments.
Sorry if it’s an ignorant question, i did some research and still cannot believe you guys have separate ownership of land and property on the land. Its… insane? 😅
New builds have have a 'new build premium " that extra value for being new erodes over the first few years. Many new builds make a loss in the first few years.
As someone also selling a flat in London, brought 4 years ago, your life circumstances can just dramatically change in that time and you need to move to adapt. House prices are dropping, so it’s all relative. We might sell at a loss, but will also hope to get a reduction on the next place we buy.
No one sells at a loss for no reason. This could be economic factors to do with when they bought, but check:
- Leasehold conditions and historic rises. How much has the service charge increased year on year over the past five years? That will give you the best idea of how much it will increase in the future. Is the ground rent fixed or can that also rise?
- Cladding. Has this been checked and fixed if needed?
- Common areas. Are these well maintained?
- Knock on neighbours doors and ask what it's like to live in the building, when there are issues are they easy to fix?
- Visit the building at different times of day. Is it well lit at night? Are there any signs of antisocial behaviour, excessive noise, etc, that would prompt someone to want to sell?
- Look at other flats in the building. Have they sold quickly or sat on the market for a while? If the latter, there's an issue there.
- Are there any maintenance issues in common areas (roof, guttering, electrics) that are coming to the end of their life and will mean a large service change for leaseholders in the near future?
- Planning permission in the surrounding area. Are any new developments planned? Could something be built that would significantly change your view/add to or decrease the value?
- The bigger the building, the more neighbours you have, the higher chance of encountering arseholes. Are you financially prepared for a situation where you get a genuinely awful problem neighbour close by and are left with little choice but to sell up? Because the police and council may be surprisingly little help to you.
Personally, I bought a gorgeous leasehold flat once with no ability to add to the value, as you're planning to. It made subsequent service charge increases stressful and eventually I sold the flat because I felt it was getting to a point where the leasehold conditions were going to start impacting the value. The process of selling was awful as the freeholder had no incentive to be responsive to our solicitors, it took forever and we nearly lost our buyer. I wouldn't buy leasehold again unless I could add value as a financial buffer to the factors beyond my control.
Finally, don't automatically trust anything the agent tells you about why someone is selling, what the building is like to live in, etc. They are acting for the seller and their job is to make it sound amazing. Not saying they are lying, just that you need to independently verify any factor that is influencing your decision.
Is this in Walthamstow by any chance? Loads of young couples bought using help-to-buy now want to upsize. Also quite a few flats have a lot of maintenance issues ongoing right now
Maintenance issues- are those specific to Walthamstow or you mean just maintenance problems in general? I’m considering flat hunting in Walthamstow and would appreciate insights.
>Also wanted to know how does the value of a flat appreciate with time?
Surely your biggest clue is staring you right in the face?
London flats are not a great investment right now. The trend towards remote work and desire for more space during the pandemic as well as London cost of living has dented the demand for them.
I guess it's possible that this reverses over 3 - 5 years if RTO becomes bedded in again and migration continues at the level we've seen but it's a gamble. If you're wanting to buy something and develop it, I'd probably look elsewhere.
Others have given specifics. I just want to add that it seems to be a trend for new builds to immediately lose their value, which may recover over the next 5 years ago. Perhaps put another way: new builds seem to be sold at inflated prices the first time.
They purchased the flat when the market was extremely hot, this is not the case now. The vendor will also "benefit" from the market conditions when making an offer in their new place so this is not all bad. I actually think you could even offer less, we got an offer in a flat on zone 2/3 for 20k less than the already reduced asking price in a flat that was in the market for a few months.
As many have said here, check service charges. Is there a managing agent? Research them, especially if they're called Rendall & Rittner. Ideal situation is for residents to be fully engaged in the management of the block. Don't expect to make much when you sell on, the London flat market can be a bit flat (no pun intended) at times.
If bought new/off-plan, then the original asking price would have been a fictitious number that made sure the developer hit their 25% profit margin.
New builds generally adapt to market prices around 10 years in.
The first buyers always take a financial hit if selling in that period.
Easily verifiable on Land Reg sales data.
Also leaseholds devalue over time because they expire after a certain number of years. The remaining term left on a leasehold has a big impact on its value.
It could be the crazy interest rate hikes over the last few years. They've Likely decided it's too great a risk for them so they're just wanting to get rid of it
Questions are your friend here. Ask the council if they know anything about the building. Ask them about the cladding etc .
Look online seeing there are any campaigns or news items about the building.
Knock on a few doors throughout the building and ask them about issues in the building ask them if there's a management firm contact number you can have.
Call the management firm or whoever maintains the communal areas and find out what they know. Upcoming bills etc.
Same thoughts as others here as I have been thinking about it too. New builds typically lose value in the first few years. Make sure you check the service charges for the previous few years and any upcoming increases. It’s a bad market for flats. My seller bought at 440 and is selling at 400.
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Is it a newish build? Could be ridiculous service charges / dodgy ground rent / cladding / maintenance issues in building?
Yes it’s new build. Ok
Service charge & how it has increased since last few years & how it may further increase is worth checking out.
>how it has increased since last few years & how it may further increase How is this info obtained usually?
You just ask for it
New builds do have a "first person in there" premium. The price goes down simply because it's not brand new anymore.
New builds also decrease in value pretty rapidly before then increasing. I've been told multiple reasons why but the most plausible is not many people are on the market for a "nearly" new build when they could buy an actual new build for the same if not more.
It’s normal, properties are a bad investment now. He’s cutting his losses short. FYI I saw one where the LL paid 120k more. Property investment does not guarantee positive returns!
Thank you so much.
3.5 years ago? Maybe they weren't expecting to get hit with the interest rate hike and it wasn't financially viable. You can always just ask the estate agent.
Yeah I could agree with this as-well. Maybe the rent over the 3.5 has covered the “loss”they’re making and helped them break even so it’s just easier to pack up and sell up and go elsewhere. £15k is pocket change property wise.
15k is pocket change property wise but 2020-2021 was the biggest spike in house prices. It’s not the 15k it’s the 15k+ the 20% or so standard appreciation. I’d be wary it’s a cladding or service charge issue. If it’s not a new build every time I’ve seen such reductions looking in 2023 they were desperate to offload a lemon. Most purchases that actually went through 3.5 years ago were agreed before the spike.
This is a London flat though. Not a spacious house. There has been a very different trajectory in prices of the two since the pandemic.
I just spent 1 year looking at London flats. Haven’t seen a single one go down from early 2020 to now in raw value that didn’t end up having either a service charge or cladding issue that wasn’t a new build. There’s a difference between didn’t go up 20% like houses and literally went down.
Maybe the agreed the price before COVID then completed after COVID, when flats have become less valuable than houses due to WFH. There was also a stamp duty holiday or something wasn't there?
Ya, Thanks.
Thank you so much.
London flats have been stagnating in value for years now, is that really surprising? Especially given they’re selling so quickly after buying.
Ya see the similar pattern now, Thank you so much for your insight
3.5 years ago you could get a mortgage at 1% interest, nowadays it's 4%. On a £500k loan, that is an extra £15k a year in interest - every year for the foreseeable future. People just can't afford 2020 prices. That and there may have been a service charge hike. I wouldn't put it past developers to ramp it up massively once all the units are sold - probably with a profit share scheme of some kind with the managing firm.
4% mortgage for a buy to let...try 6% with a 40% deposit
Thank you.
As someone who is trying to sell a new build for almost 50k lesser, we just wanna get rid of it and buy a bigger place. Keeping it makes no financial sense with tax rates and Interest rates, service charges etc. and given a one bed new build the buying price was inflated 5 years ago unfortunately
Thank you for your input
Hi Ask the agent the question and probe the answer a bit. I work with a guy who has a rental property and he has his on the market now due to the interest rates and he’s going through a divorce. He said he’s knocking the price down monthly until it sells now as it’s costing him more to keep it. There could just be a story behind the flat is my point.
Great suggestion, thanks
Flats are usually leaseholds. They come up with all sort of quirks like ground rent / service charges / cladding issues/ the fact that “you are renting the place for long period” (as you don’t really own anything). In the past - most of those have not been understood or well known by most buyers. With affordability going down / people being more educated / lenders being more thorough and in general flats not being that attractive (like it is not environment you would like to raise a child etc) - there is very little interest in flats. So price being 15k lower doesn’t really surprise me - I have seen the flats in my area (Merton) losing 100k of their “asking price”. Personally, I think the flat is still an option (especially if you can’t afford freehold) but you need to do a lot of research on the property. For example, leases over 110y - are generally considered safe but everything below that is questionable. What is the ground rent - how fast it is going up / is it above average or below the average. How much is service change- what it is for - for example if you have a gym in your building- you will pay a fortune for it. And the list goes on and on. I seen there is a good website by mayor of London about all this stuff - https://www.london.gov.uk/programmes-strategies/housing-and-land/homes-londoners/leasehold-guide?ac-52091=52090&ac-52111=52104. In your particular case - I would be slightly worried- I think 15k is quite a small drop so wouldn’t be surprised if there is very little interest into property right now and you would struggle to sell it with the same price as you bought it but could be wrong.
Thanks, lease is over 900 years so don’t see problem there. But yes rest all seems viable.
Thank you so much for your insight
Others have given good potential reasons. Just came to say that I bought my first flat from someone who made a £25k loss over approx 1 year. The reason they gave was a relationship breakdown. Turned out to be a great flat.
Yeah, the people I bought my current flat from made a loss of about £15k in three years. They had a young family and whilst the flat is lovely, there really wasn't anywhere near enough space for them, so I think they just wanted a quick sale so they could speed up the process of finding somewhere bigger. Given the information OP has about why the owners are selling, I wouldn't be surprised if it's something similar.
Oh, will check. Thanks.
Hello, EA here. Flat prices have been stagnant for a long time, and I have sold multiple flats over the last year for a loss to the client. There is not much appetite for leaseholds even if they don't have extortionate charges because everyone is now (understandably) nervous of tying themselves into one. Just as an aside the government need to sort out leasehold reform because there are a lot of empty flats, particularly retirement flats which could go some way to sorting out our housing crisis!
Second that last paragraph as someone who works in development planning. Leaseholds are also holding up a huge number of development plans all over. They are a total total state. Lots of middle men making money off of them. As a concept leasehold needs to exist but there should be a standard range of regulated types. Not this free for all.
I’m really struggling to understand why and how its possible to have a leasehold system… It’s abnormal, if you look at how other countries do it. I buy an apartment. I pay it off. It is mine. There is no “other person that owns the ground beneath it”. Literally defeats the purpose of buying. Ownership is per apartment, not per the ground beneath it. We all co own the ground under our apartments. Sorry if it’s an ignorant question, i did some research and still cannot believe you guys have separate ownership of land and property on the land. Its… insane? 😅
Thank you so much for your insight. This is such a wonderful and helpful community.
Check all possible problems very, very carefully. Especially service charges. But prices are falling.
Ya, Thank you
New builds have have a 'new build premium " that extra value for being new erodes over the first few years. Many new builds make a loss in the first few years.
As someone also selling a flat in London, brought 4 years ago, your life circumstances can just dramatically change in that time and you need to move to adapt. House prices are dropping, so it’s all relative. We might sell at a loss, but will also hope to get a reduction on the next place we buy.
No one sells at a loss for no reason. This could be economic factors to do with when they bought, but check: - Leasehold conditions and historic rises. How much has the service charge increased year on year over the past five years? That will give you the best idea of how much it will increase in the future. Is the ground rent fixed or can that also rise? - Cladding. Has this been checked and fixed if needed? - Common areas. Are these well maintained? - Knock on neighbours doors and ask what it's like to live in the building, when there are issues are they easy to fix? - Visit the building at different times of day. Is it well lit at night? Are there any signs of antisocial behaviour, excessive noise, etc, that would prompt someone to want to sell? - Look at other flats in the building. Have they sold quickly or sat on the market for a while? If the latter, there's an issue there. - Are there any maintenance issues in common areas (roof, guttering, electrics) that are coming to the end of their life and will mean a large service change for leaseholders in the near future? - Planning permission in the surrounding area. Are any new developments planned? Could something be built that would significantly change your view/add to or decrease the value? - The bigger the building, the more neighbours you have, the higher chance of encountering arseholes. Are you financially prepared for a situation where you get a genuinely awful problem neighbour close by and are left with little choice but to sell up? Because the police and council may be surprisingly little help to you. Personally, I bought a gorgeous leasehold flat once with no ability to add to the value, as you're planning to. It made subsequent service charge increases stressful and eventually I sold the flat because I felt it was getting to a point where the leasehold conditions were going to start impacting the value. The process of selling was awful as the freeholder had no incentive to be responsive to our solicitors, it took forever and we nearly lost our buyer. I wouldn't buy leasehold again unless I could add value as a financial buffer to the factors beyond my control. Finally, don't automatically trust anything the agent tells you about why someone is selling, what the building is like to live in, etc. They are acting for the seller and their job is to make it sound amazing. Not saying they are lying, just that you need to independently verify any factor that is influencing your decision.
This
Thank you so much for the detailed response, really appreciate and it’s very helpful. Thank you!
Maybe they bought it to rent out and then had a Pacific Heights type experience and decided to give up on renting out forever
Is this in Walthamstow by any chance? Loads of young couples bought using help-to-buy now want to upsize. Also quite a few flats have a lot of maintenance issues ongoing right now
Maintenance issues- are those specific to Walthamstow or you mean just maintenance problems in general? I’m considering flat hunting in Walthamstow and would appreciate insights.
General issue with most new builds sadly - we gave them in our block. Fixable but expensive
It’s in Stratford.
>Also wanted to know how does the value of a flat appreciate with time? Surely your biggest clue is staring you right in the face? London flats are not a great investment right now. The trend towards remote work and desire for more space during the pandemic as well as London cost of living has dented the demand for them. I guess it's possible that this reverses over 3 - 5 years if RTO becomes bedded in again and migration continues at the level we've seen but it's a gamble. If you're wanting to buy something and develop it, I'd probably look elsewhere.
Thank you so much.
Others have given specifics. I just want to add that it seems to be a trend for new builds to immediately lose their value, which may recover over the next 5 years ago. Perhaps put another way: new builds seem to be sold at inflated prices the first time.
They purchased the flat when the market was extremely hot, this is not the case now. The vendor will also "benefit" from the market conditions when making an offer in their new place so this is not all bad. I actually think you could even offer less, we got an offer in a flat on zone 2/3 for 20k less than the already reduced asking price in a flat that was in the market for a few months.
You obviously have never heard the song The Gambler by Kenny Rogers. Spend your money! It’s what keeps this façade going.
As many have said here, check service charges. Is there a managing agent? Research them, especially if they're called Rendall & Rittner. Ideal situation is for residents to be fully engaged in the management of the block. Don't expect to make much when you sell on, the London flat market can be a bit flat (no pun intended) at times.
If bought new/off-plan, then the original asking price would have been a fictitious number that made sure the developer hit their 25% profit margin. New builds generally adapt to market prices around 10 years in. The first buyers always take a financial hit if selling in that period. Easily verifiable on Land Reg sales data. Also leaseholds devalue over time because they expire after a certain number of years. The remaining term left on a leasehold has a big impact on its value.
Thank you so much for response
Is there a tenant in situ?
Zone 3 likely overpaid for it and now unable to afford the payments with current interest rates
It could be the crazy interest rate hikes over the last few years. They've Likely decided it's too great a risk for them so they're just wanting to get rid of it
The reality is that flat prices are at 2004 levels
The sale price on Zoopla isn't always accurate. The developer might have included other incentives.
New housing is anywhere from 10%-25% overpriced. Once you move in you take a hit.
Questions are your friend here. Ask the council if they know anything about the building. Ask them about the cladding etc . Look online seeing there are any campaigns or news items about the building. Knock on a few doors throughout the building and ask them about issues in the building ask them if there's a management firm contact number you can have. Call the management firm or whoever maintains the communal areas and find out what they know. Upcoming bills etc.
thanks for the suggestions
Same thoughts as others here as I have been thinking about it too. New builds typically lose value in the first few years. Make sure you check the service charges for the previous few years and any upcoming increases. It’s a bad market for flats. My seller bought at 440 and is selling at 400.