Quarter of new homes in Southwark are sold overseas

Join in these discussions today! Log in or register.
Monday 24 July 2017 2.04pm
The article touches lightly on the main reason property is sold overseas. The developments need to prove there is demand. Investors who are used to using all cash and waiting years are the investors developers have to sell to. People who expect to get a mortgage and then move in 6 months later can not commit years in advance. No lender will hold the mortgage offer open that long. Most solicitors are a bit concerned when a buyer dependent on a mortgage agrees to buy a property before they know they can obtain the financing.

So, the buyer who wants to live in a property mostly look at properties which they can finance rather than pay all cash. That stops them from being the focus of an off-plan development which is years from completion.

This is not something that a local council can 'fix'. It is a side effect of the financial marketplace. The Central government would be hard pressed to come up with a viable solution.

Most people believing there is something nefarious going on are just unaware of how finance comes together for large, multi-year, maybe multi-phase, developments.

Related news & features

Monday 24 July 2017 2.16pm
Monday 24 July 2017 3.48pm
Not really that simple.
Another way of putting what you've just said is: "The current model that developers are allowed to operate means that they can offload the risk to purchasers or speculators at a very early stage in the development - sometimes before the ground has even been broken"

...if you press it, they will come.
Monday 24 July 2017 9.28pm
John_Corey wrote:
Most people believing there is something nefarious going on are just unaware of how finance comes together for large, multi-year, maybe multi-phase, developments.

I'd say you're largely correct, but don't think people think it's anything nefarious. Just that property in the area is increasingly seen as part of an international investment market, at the same time as being miles beyond the means of most residents to own.
Tuesday 25 July 2017 11.22am
Ivanhoe wrote:
Not really that simple.
Another way of putting what you've just said is: "The current model that developers are allowed to operate means that they can offload the risk to purchasers or speculators at a very early stage in the development - sometimes before the ground has even been broken"

No, that's not the same thing at all - pre-sales do de-risk the development to some degree, but, as John said, the main reason is to prove demand and satisfy financing conditions. Lenders often won't commit to financing unless they can comfortably underwrite their exit position, and pre-sales provide proof of demand/value, hard cash deposits, and contractual liabilities from purchasers to complete on the sale once the development is finished. And most of these big developments finance 60%+ of total costs, so it's a very important part of the process.

Interestingly, lenders would MUCH prefer to have UK individuals as the pre-sale buyers, as contractual claims are far easier to pursue against someone who is UK-based rather than somewhere like Shanghai or Doha, but unfortunately the demand just isn't there (partially due to the reasons John mentioned above as well).
Tuesday 25 July 2017 12.14pm
sjac wrote:
Ivanhoe wrote:
Not really that simple.
Another way of putting what you've just said is: "The current model that developers are allowed to operate means that they can offload the risk to purchasers or speculators at a very early stage in the development - sometimes before the ground has even been broken"

No, that's not the same thing at all - pre-sales do de-risk the development to some degree, but, as John said, the main reason is to prove demand and satisfy financing conditions. Lenders often won't commit to financing unless they can comfortably underwrite their exit position, and pre-sales provide proof of demand/value, hard cash deposits, and contractual liabilities from purchasers to complete on the sale once the development is finished. And most of these big developments finance 60%+ of total costs, so it's a very important part of the process.

I'm struggling to see how we're not saying the same thing, although you obviously think not.

...if you press it, they will come.
Wednesday 26 July 2017 12.39pm
Different motivation for the pre-sales, Ivanhoe, which leads to very different solutions to the perceived problem. If overseas developer pre-sales are solely to "offload the risk to purchasers or speculators" then this is something that could be regulated against, but if pre-sales are required to secure the funding to start development then it's a much more complex solution.
Wednesday 26 July 2017 1.45pm
Perhaps it's not "nefarious", but surely it's not ideal and should be limited by the Council and UK government?

Something they should change in my opinion is to prevent overseas buyer to sell the property bought off-plan before completion. They can still make a huge profit, but at least they should pay the stamp duty like us mere mortals that we can't get a mortgage 4/5 years in advance on something that doesn't exist.

To post a message, please log in or register..

Keep up with SE1 news

We have three email newsletters for you to choose from:

Proud to belong to

Independent Community News Network