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Original poster

Help to buy in London

26 replies

Witchlight · 09/10/2019 23:19

DS has been looking at the help to buy scheme. Does anyone have good or bad experience of it?

The biggest downside (to me) is that you have to buy a new build, which will depreciate as soon as it becomes “used”.

Also, is it possible to bargain down the price developers are quoting, as you normally would, or do you end up paying the listed price as there is limited property available on this scheme?

Has anyone used this scheme?

OP posts:
NotSuchASmugMarriedNow1 · 09/10/2019 23:22

I've never heard of houses depreciating in value as soon as they are used. That just applies to cats doesn't it?

In any case - when used as a long term investment property has always risen in value

NotSuchASmugMarriedNow1 · 09/10/2019 23:22

Cars not cats 😃

Original poster
Witchlight · 10/10/2019 00:08

I agree that property will rise overtime, but new builds are often priced at a premium. The flats allocated to help to buy, seem to be the ones which have the least favourable positions. This might because they are the cheapest though, as the scheme is capped at £600k

DS has asked me what I think about it, as he is currently paying £800 rent + bills in a (grim) shared house. This way is one of the few ways he could afford to buy something now. Rent is so very high and the housing standards so very low.....

OP posts:
NotSuchASmugMarriedNow1 · 10/10/2019 06:39

How much would his mortgage cost a month? Every £800 he pays in rent is money that could have paid down his mortgage. If help to buy is his only way to get a foot on the housing ladder then surely it's better than renting

Alexalee · 10/10/2019 08:03

Have a look at the price of 2nd hand flats in the area
In some parts of london the used 2 bed flats are 300k and the new ones with htb are 450k... that will take a decade to ever be worth that on the 2nd hand market
London has thousands of unsold new build flats so I would say it is a terrible idea and your son would likely be in negative equity for a very very long time.
Need some figures to give any proper advice though, ie if all he can afford is 800 a month I doubt he will find any new build flat he can afford even with htb

Alexalee · 10/10/2019 08:05

And to the pp poster that said about new houses not depreciating... they do hugely especially if htb is priced in, as the person you are selling to doesnt get the 40% help from the government, they can only afford to pay 40% less

Original poster
Witchlight · 10/10/2019 12:52

He is looking at 1 bed flats costing £450k

The HTB loan would be £180k and he would have a mortgage of £220K. He has savings of nearly £60k, which would be £50k deposit and £10k buying costs. He has talked to his bank and they have indicated they would approve a mortgage at a good rate - at today’s rate being £910pcm.

He has seen a flat in a low service charge block advertised at £450k. If this was not a new build, I would have suggested he think of offering £400-425. With this scheme I wondered if it was possible/usual to bid the price down. Similar, but not so lovely and clean flats, are on the market for £410-£430ish. The market is definitely very slow for normal property.

OP posts:
Alexalee · 10/10/2019 13:46

What area is he looking at. That seems a very small difference between new with htb and 2nd hand
I assume he earns around 50k, and so would have a max budget of around 275 for a 2nd hand flat

JoJoSM2 · 10/10/2019 13:55

You can haggle with developers as they usually have a bit of wiggle room. Is he looking at zones 2-3 only? He could easily get a one bed flat for 275k further out.

dodgeballchamp · 10/10/2019 14:04

The biggest problem I have found with HTB as I researched it myself is that after 5 years you start paying back the government’s loan + interest so you have no choice but to remortgage (or sell, but this depends on the property having gone up in value). Has he looked at shared ownership instead? Still not ideal but I think it’s a better long term option

breakfastpizza · 10/10/2019 14:26

Just be aware that new builds often set their service charges lower to entice buyers, then jack them up when all units are sold.

Original poster
Witchlight · 10/10/2019 14:29

He is looking in the Clapham/Balham area, as his work is dual site and the transport is quick and cheap for both.
He would expect to be promoted several times in the next 5 Years, so paying back the HTB loan is feasible.
I think he needs to work out how much the flat is worth to him, and offer that - rather than just that it is one of the few ways he can afford to own a flat there.
We have looked at shared ownership, but don’t like the restrictions in selling and the rent levels set.

If he carries on renting, he can only save £500-750 pcm after rent.

OP posts:
Alexalee · 10/10/2019 14:41

I dont see a lot of new build 1 beds at 450k in that area tbh
And under 300k for a 2nd hand flat isnt coming up with much
It doesnt look like he can afford the area
If he is due some big promotions over the next 5 years maybe rent a bit longer, prices in that area are only going to come down... there are about 10000 flats in nine elms that arent selling... so only way to sell them will be to lower the prices

Lightsabre · 10/10/2019 14:46

I think that's a crazy price for a one bed. It is very likely that prices will be coming down further in London and if there is a recession, these sorts of flats halve in price. It happened in the late 80's. There are very few first time buyers that can buy in Zones 1-2. He would have enough of a deposit to find a decent 2 bed in Zones 3/4 without the htb premium and all the risks with service charges. He could then rent out the second bedroom or even stay longer term with a family and ride out any upcoming recession.

Please advise him not to do it!

JoJoSM2 · 10/10/2019 14:50

Does he know Clapham/Balham? Is the flat really in one of those two? Seems a bit low for a new build unless it’s right next to an estate or something.

Original poster
Witchlight · 10/10/2019 15:26

www.zoopla.co.uk/new-homes/details/52936430

This is one of the developments he has seen, also one in Abbeville Rd. There aren’t many but they do exist.

The problem is not just the price, as breakfastpizza said, it is the service charges. All the Nine Elms flats have porters/gyms and therefore ridiculous service charges.

He has lived in Clapham for a year (renting) and has a choice to continue in student-style digs, or pay more and save less to afford somewhere decent.... or to buy using HTB.

He is currently asking around (me, family, friends) to try and determine the pitfalls.

OP posts:
Alexalee · 10/10/2019 16:04

I dont say this lightly but buying a new build london flat could ruin him financially for over a decade when not if the recession hits, all of these built flats that they cant sell now will be sold off by the banks for what they can get... I honestly wouldnt be surprised if these zone 2 london flats fall by 50% from their htb sales prices
I suppose the only glimmer of hope I would give htb is that if it falls in price the government absorb 40% of the loss, but his deposit would be wiped out too. Look at 1 bed prices in the area for 2010, that is probably where the floor will be

dodgeballchamp · 10/10/2019 16:10

There’s no need for him to stay in Clapham. Other places easily accessible to the northern line like Morden, Mitcham etc have 1 bed flats under 250k. I viewed a shared ownership development in elephant and castle the other day where combined monthly costs were under 800. Also 800 for a house share is steep, I’m currently paying 900 to rent a one bed flat to myself in tooting and house shared in London for 5 years prior to that, never paid over 650 all in for a shared rental. They are there if he looks.

JoJoSM2 · 10/10/2019 21:14

I think I would have really liked the location as a young first time buyer. The reason why the flat seems cheap, though, is because it's only 320sq ft so the size of a studio vs normal one beds at 450sq ft+
So the price is actually a bit of a rip off.

Has he seen the size of the place in person?

I've just had a look on Rightmove, and for his 275k budget, he should be able to find a one bed in Crystal Palace. It's a good young professional location with nice pubs and bars around the Triangle, a very nice park with a leisure centre etc.
Or try Sutton. More of a family area but tons of trains in different directions if he needs to go different places for work. A few places to go out and parks, leisure centres etc.

Original poster
Witchlight · 10/10/2019 21:18

So, to sum up:

  1. All new builds have inflated prices
  2. HTB flats are less open to negotiations for price and seem to be the least desirable in the building.
  3. Market is currently inflated, particularly for 1-2 bed new builds.
  4. service charges can be hiked when all flats sold.

Interesting that not one person has had positive experience of the scheme.

OP posts:
JoJoSM2 · 10/10/2019 21:31

I do have friends who bought through the scheme. However, it is high risk whichever way you look at it. Any new builds (scheme or not) are generally priced 20-ish% higher than similar resale stock.

Basically, buyers either rely on selling after the 5 years is up (risk as you don't know what the market will be like and what the property will be worth).

Or you need to come into lots of money/massively increase earnings to take on the full mortgage.

Or you get screwed with extortionate interest rates.

So generally, if at all possible, it's more financially sensible to buy a second-hand flat you can afford on a normal mortgage.

notanurse2017 · 10/10/2019 21:42

Clapham and Balham are expensive - even for London! Any reason why your ds isn't looking in cheaper nearby areas - Streatham, Crystal Palace etc?

househunter19 · 13/10/2019 07:52

OP, if your son has multiple commutes and is looking to buy in a good area, he might find this new property search tool helpful. it takes into account multiple commutes, lifestyle needs (e.g. access to a good high street, transport, supermarkets, etc), budget, and so on. It may surface better buys than the one he's contemplating!

rzasoshp · 16/10/2019 11:47

I think the abbeville development posted above has been mentioned on this board before, I think the developer went bust.

Embracelife · 17/10/2019 08:12

So he goes from 800 plus Bill's to 910 plus Bill's plus all annual costs like insurances and on 5 years might be stuck paying 1.5% interest on 180k or forced to sell possibly at no gain.

But if it s better than renting for 5 years a nd he happy to take the risk go for it