New build freehold houses, Help to Buy Scheme etc

[Neverending2020]

A couple of interesting and informative articles to read -

www.plymouthherald.co.uk/news/plymouth-news/truth-buying-new-build-freehold-3376240

www.which.co.uk/news/2020/06/exclusive-one-in-seven-help-to-buy-homes-lose-value-despite-local-house-prices-soaring/

Thanks. Interesting indeed.

1. The first one about service charge: I'm buying a new build freehold and was surprised that there was a service charge but it really is not much annually. It shouldn't go up much at all wither because of a sink fund. However, I have lived in buildings near green spaces that are the council's responsibility and the council don't maintain them. So, on balance, at least with the service charge there is some peace of mind that the development will not be neglected and therefore still look desirable.

I suspect that like with most things, if there is something highly unreasonable then it can and will be challenged legally. If there is an entire new build development against the developer with a strong and legitimate case for unreasonable conduct, then the developer would be inclined to negotiate because a court may have little sympathy for the developer if they are blatantly being sharks about things. I suspect that case highlighted in the article you linked would set a helpful precedent.

1. About 1 in 7 help to buy houses lose value despite local house prices soaring. But there is a cushion for help to buy homes losing value...

I didn't know this but others who have Help to Buy have pointed it out. Hopefully I've understood it correctly. With Help to Buy the homeowner shouldn't actually lose as much if the house loses value because they repay 20% of what the house is worth than what they initially borrowed, so help to buy acts like a bit of a cushion.

Example using simple numbers. House was 100k, 5% deposit, 20% help to buy loan, 75% mortgage. In 5 years time the house loses value and is now worth 50k. So, the 20K Help to Buy loan becomes 10k (still 20% of the house value).

Think that is right.

@ChocoTrio I don't believe that is the case... The govt isn't going to put themselves in a position whereby they lose money. My understanding was that the loan has to be paid back in full regardless of whether the value of property falls. I may be wrong though as I knew HTB would never be an option for me in London (due to inflated prices of new builds) so I haven't explored the ins and outs. Though I recall seeing recently on here that somebody said the full loan would need to be repaid, not 20% of value 5 years down the line.

I believe it's 20% of the value so if worth less, then you repay less.
However it doesn't help you move up the next step of the ladder. Also bear in mind that non new builds have shown much bigger % rises over the years thus making it even harder to move on/up.
The first year of help to buy was the only year where the increased value was more in line with older homes.
Then the housebuilders got wise and redid their figures...

@Smallgoon

See thread that was on this forum recently: Help to buy equity loan

It was actually on a thread this forum that I learned that. Seems to be legit. I thought it was weird too - because the government stand to lose money in that case. But actually it seems like a political move.

Poster @Embracelife wrote: "The govt don't care if they lose or not. They could have put all that money into building council houses for low rent. It s a political decision. Home owners are more likely to vote for them ...so worth any loss."

@Neverending2020

It is a tough one. Older homes may have larger % rises in some areas, but not others. They are also more likely to have extra maintenance costs. Sometimes it does make sense to have a new build, not just for help to buy reasons (I'm not going with help to buy, I chose a new build purposefully).

I struggled to choose between an old building vs a new build. It's just that in the area the second hand homes in my budget also needed lots of work and there can be some surprises when work gets carried out - it can easily become a money pit.

New build shouldn't need much extra work doing to them for quite some time and are apparently easier to clean. Everyone moving in is in the same boat and on my new development there is a settling in welcome initiative to help everyone feel as part of the new community. There is also a new school built for the development and it's close to public transport too.

It really depends on a lot of factors. I haven't moved in yet and I do get a bit nervous about it when I read horror stories. But I also have first hand experience from talking to people already living on the development that it's a nice place to live and they are happy with their house (which happens to be the same style as the one I'm buying - that's kinda how I got friendly with them as I was just looking at their house, they were in the front garden and then we got chatting. Very friendly and kind too).