A family member has told me that he placed a £7k deposit on a two bed, second floor appartment, off plan, in a development at Bengal mill, Ancoats which is due for completion in 2009.( purchase price £135k)
The selling agent got in touch recently to finalise the contracts. With all the bearish news in the media said family member is now having second thoughts.
He signed up when there was the posibility of the super casino, which has since evaporated.

His plan is/was for BTL. Now I know BTLrs are considered fair game here but this one is a relation and I really would not like to see him getting skinned. I have explained all the recent, relevant information related to possible HPC and he is now having second thoughts.

I would really appreciate some information related to the local market. ie
inventory

number of similar new builds in the area.

Local rental prices.

the possibility of him achieving a tennant paying close to what he'll need to cover his mortgage (which is close to the full amount of the asking price.)

possible selling price(which might indicate what he may lose)

I know none of us have a chrystal ball but i would like to give him an alternative point of view based on fact and local knowledge to enable him to make an informed decision which is not based only on VI spin.

All info greatly appreciated.

don't worry about local knowledge,the economy is tankign,HPI will be in the distant memory in two years as people struggle with repos,hiher iRs etc.

flats are just about the worst thing to buy.slums of tomorrow.tell him to get real and read some of the main forum

Ok, I'll have a go.

capital losses. Acquisition price £135k - off plan bulk investors will have paid about 15% less than this (whatever guff you've heard from the developer) - £115K (so he's already £20K down).

£2.5Kish. in fees (mortgage and stamp duty) to buy it.

Ongoing - rent is likely to be between £600 and £700 a month - tops. Mortgage will be £700-750 a month - rent will probably be £100-150 a month less.

Service charge will rapidly be £1,000 a year (say £500 first year), ground rent of £125 plus pa.

Add in 10 for voids, so that's another say £1,000 a year losses and in year one, if it's not going to go up in value (which it won't, I'll bet that now), he's looking at about £25K of losses after year 1 if he tries to sell in the current market.

Also, do you mind telling me, if he was BTLing - was he doing it properly or speculating on future capital increases in the flats ?

Anocats = fairly depressed area of Manchester (think slum clearances in t'Olden days). Now entirely council housing and new developments.

NOT an aspirational area - nowhere north or east of the City Centre is. The young professionals he will seek as tenants will want to rent in south Manchester (Chorlton/Didsbury).

Area is swamped with new developments within a 1 to 2 mile radius. Many of which are unoccupied.

Rental in city centre for 1 bedder £450 to £550.
2 bedder £500 upwards (oversupply is worst in 2 beds).

I was renting a brand new 2 bedder bought off plan for £175k in the city centre for £525 about 12 months ago. I had very few neighbours as the landlords were toiling to get tenants.

This is a 1 bedder not too far away.

http://www.rightmove.co.uk/viewdetails-669...8&tr_t=rent

This is a massive development of 1 and 2 beds, much of which was bought by speculators and last time I was in Manchester (November), the developers were building more units. You can draw your own conclusions as to the effect on rental prices of a massive oversupply of new builds.

This is his competition...

http://www.rightmove.co.uk/viewdetails-175...0&tr_t=rent

Do not buy a flat in or near Manchester city centre, particularly a newbuild rabbit hutch. There's an oversupply and prices are falling fast. I live and work here.

ditto


Lived nr there

As said. Avoid.

If he wants to limit his losses to 7k and be guaranteed no neg. equity and no sleepless nights, he can pass it my way. I'll look after it.

Thanks for the replies, it's as much as I'd thought.

OMFG - ignore the techo bable above about yields, deposits, returns et al - the simple message is DO NOT BUY

The city centre market is completely saturated with new developments getting planning permission all the time - I got out at the begiining of last year having bought in 1999. Prices hadn't budged an inch since 2003 and were sliding at the start of last year

Nobody but the most naive would touch any city centre apartment block at the moment - if he must buy make sure its right in the centre and preferably a refurb not a new build - at least he will minimise his losses on resale

Keep out. I work in Development in Manchester...flats are already getting a hiding.

Just an update to say the family member concerned has not completed his purchase. Although he has lost £7k I maintain he was lucky.

I have flaged and monitored properties in and around Manchester for the last 6 months. Flats are getting a smacking. I have already mentioned on another thread about Lymm. There's some new apartments on the canal side that one agent told me "were not getting viewings when advertised well below their recent purchase price". I have done this just to build up my own local information on the areas that I am interested in, but across all property types.

Also in Lymm, there are currently two x 2bed flats on at 120k ish, the same type of flat was 149k summer 2007.

There's 1 x 2bed flat at 139k that is a last, not sold in the block job. This was 177k last September.

Check them out on a search, there's only a couple of agents in Lymm,

Lymm is supposed to be crash proof It is prime property invester village that's commutable to Manc, if that's going then the city centre will be getting a beating down too.

Take the 7k hit on the chin, and thank your luck stars your relative have been saved from getting his/her fingers burnt more.

Flats in Manchester will be lucky to get 75k in 12 months from now. I wouldn't give 75k this month for one.

Good luck, and happiness

I'd rather live in Lymm than Ancoats.
It's nearly Cheshire