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Developers offering bigger discounts

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We're seeing developers move pretty quickly to increase the discounts they are offering to investors in response to a reduction in demand from first-time buyers and investors generally. Developers rely upon off-plan presales in order to obtain bank funding and it has taken a noticeable increase in discount to tempt buyers back into the market. Previously developers have offered between 10 and 15% discount on schemes in order to achieve perhaps one third of the scheme presold - which was often a prerequisite of the development finance.

Now developers need to offer between 15 and 20% or more to bring in buyers and what's more, valuers are more cautious than ever meaning that perhaps the starting price for these discounts has lowered as well. This bodes well for investors seeking enhanced yields and we've seen some of our schemes sell very quickly recently based upon these discounts. In addition, developers are offering finished stock at good prices, far better than the 5% offered in press advertising to first-time buyers but they want to see decent volume not just one off sales which is where our buying power comes in.

Of course it isn't just new build where deals are to be done and where Assetz can negotiate significant discounts for our clients. We've also seen it on re-sale properties and our latest student refurbished houses in Manchester (and soon several other cities) are benefiting from the vendors agreeing lower prices. The difference in this case is that the yield was already very good and is now even better.

It is now near certain interest rates will come down in February to 5.25% and the general consensus is that rates will drop to around 4.75% by the end of the year.

If you missed any long-term fixed rate mortgages the last time rates hit rock bottom then you've got a second chance to do so coming up shortly. With rents rising and demand
for housing unabated (but shifting more towards rental than ownership) later this year could be a good time to consider fixing your debt cost for the long-term.

Stuart Law

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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