“The 200 home tower block that sold out in under five hours” screamed the headline in the Telegraph.
“Maine Tower: More apartment hysteria as another residential skyscraper at Canary Wharf sells out in hours” exclaimed City A.M.
“Jeremy, you’re an idiot”, shouted my wife as Flora skipped down the stairs wearing a rather suspect stripe and chequered combo having been dressed by her father.
I know nothing about male fashion let alone the dress code for 3 year old girls. And some of you may be thinking that my prediction of a probable crash in the new build market is equally misguided. After all, the apartments in Maine Tower worth approximately £140m sold out in less than five hours.
Indeed 50% were sold to domestic buyers so there was a healthy mix of buyers too. So clearly I am completely wrong.
Or am I?
Earlier this week I gave a presentation to a well-known firm of fund managers who have large investments in a number of the developers. One of my clients is a senior manager within the firm and asked me to give a talk to some of her people as they liked my research.
They quite rightly questioned my pessimistic view considering the recent success in Maine Tower.
Here is what I told them (in brief) - According to research by Molior:
- 10,280 units started construction in Q1 2015, which is 177% up on the quarterly average for the preceding five years
- 51,120 units are currently under construction, which is more than double the last peak at the end of 2007
- Sales are now lagging starts – having tracked them closely for three years. In Q1 2015 sales volumes above £1,500 psf dropped by 76%.
And this is the key. As I said in my report, you should not discount new build developments altogether. I have no particular opinion on the Maine Tower but I am not surprised that it attracted a huge number of buyers because it is a completely different price point.
There were 230 apartments which ranged in asking price from £350,000 to £1.25m. So they are far more affordable than many developments where the minimum price is £1m and ultimately a lot higher.
Of course this does not necessarily make them better value but they are certainly more accessible in terms of price. And when you take into consideration the changes in policy on SDLT, etc., then it is unsurprising that investors are targeting lower value developments.
Indeed it is likely that developments in cities such as Manchester and Birmingham, for example, will also sell well due to the price factor and you can expect to see newly released pension money flood into some of these.
As always, if you are planning to buy a property, the key is to be sure of values wherever you are buying. Just because a new build flat is valued at £300,000 does not mean that it is a good or bad investment. It very much depends on a multitude of factors.
Doing your due diligence is essential. This may sound obvious but how many of the people who bought in Maine Tower do you think got caught up in the auction style atmosphere generated at the launch event?