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For a long time now I have been waiting for the main builder I sell for to take some action to make some attractive offers to at least get some people interested in buying a property.
So far they have done nothing except include a furniture pack and prices havent budged at all.
Whilst the same properties that they built locally are coming down fast in the resale market, they continue to do nothing. Its almost like they are still thinking it will just bounce back and people will pay the current prices when the market picks up.
There is not one crane on site now and most of the staff have gone, yet they have rows and rows of finished properties that they seem to think people will buy at the prices now.
The prices now are boom prices and with the exchange rate there is no hope to find an English buyer and the local native buyers wont pay these prices to live in English style communites.
To give an example, the cheapest property they offer is 2 bed 1 bath apartment with garden for 162.000 euros plus tax. Go back a while and at 1.50€ to the £, made them about £108,000. Worth it?. In my opinion no, especially as a 2 or 3 years back I had been selling these on the same site for about £50,000. Now we have the € around 1.1 so that property is £147,000 and there is not any hope at all of selling them.
On one site alone they are having to pay 25.000€ a year in community charges for the palces they own.
i just dont understand it and I dont understand the denial. I have no idea where they go next because I just dont see any hope of selling these anymore. They are a cash rich builder but still at the end of the day having these places unsold is not making any money at all and I know they will be an asset on a balance sheet but its not good until you can sell that asset for cash.
Are all the builders in denial?
Bernard
😕 😕 😕
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This something that I have discussed with a number of developers and mant are in a catch 22 position
They have mortgages on propertues based on the old valuations and they cannot sell at a low prices as they do not have enough money to discharge the existing mortgages
From the assett perspective the properties are still on their books at the old proces making the company look financially healthy and the mortgage payments are reducing
Often they simply don´t bother to pay the community fees anyway so it can be better to laeve the properties empty and unsold
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“They have mortgages on propertues based on the old valuations and they cannot sell at a low prices as they do not have enough money to discharge the existing mortgages”
ARE YOU SAYING THAT EACH & EVERY APARTMENT HAS GOT MORTGAGE OUTSTANDING TO THE FULL VALUE OF THE APRTMENT AT THE HEIGHT OF THE MARKET ? wHAT ABOUT THE THE DEVELOPERS CAPITAL ???
From the assett perspective the properties are still on their books at the old proces making the company look financially healthy
THE ASSETT VALUE SHOWN ON THE BOOKS OF THE COMPANY SHOULD BE AT COST OR NET REALIASBLE VALUE. NOBODY LOOKING AT THE ACCOUNTS WILL GIVE THE WINDOW DRESSED POSITION ANY STANDING.
and the mortgage payments are reducing.
THE DEVELOPER NEEDS CASH FLOW TO REDUCE THE BALANCE. IF HE IS NOT SELLING, WHERE IS THE CASH BEING GENERATED FROM ??
Often they simply don´t bother to pay the community fees.
THE ADMINISTRATORS DONT CHASE THEM AS THEY WANT MORE BUSINESS FROM THE DEVELOPER FOR THE FUTURE, ITS YOU SCRATCH MY BACK.
anyway so it can be better to laeve the properties empty and unsold
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What capital
Half the reason that we are in state that we are in is the developers not providing Bank Guarntess and using the funds collected to fund the build which has resulted in so many recent issues where the developers have just pulled the plug on sites
On one site alone more than 800 buyers are in this situation, more than 500 on another site where typically they have paid the developer €40k with no bank guarntee
Yes I know of 3 sites where the value of the banks mortgages, based the the real value that they would now have to offer the properties for to sell them, probably a reduction of 40% on the original 2006 valuation, would not give the developer enough money to discharge the mortgage and they have no money.
In this area 3 more developers filed for administration last week alone.
I absolutely agree withe the comments of the community fees as on our site we had to replace the administrator for this reason
It seems that a easier option is to file for administration
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When prices were high many developer mortgages/loans were for 70 or 80% of the valuation. This mortgage could then be subbrogated to a buyer (developers mortgage) if they wanted it and were happy with the terms. Often the banks turned blind eyes with respect to criteria, as we know.
Now that valuations have fallen, any developer still with this level of leverage has no option but to keep his price high otherwise he cannot discharge the mortgage or have the loan subbrogated.
Many more will go under as it is their easiest and best option.
I heard the other day that there were very good tax advantages if profits were rolled onto other developments, and surely this would have led to many developers doing this and building more!
Some buyers are successfully re-negotiating the price down and under law if the mortgage cannot be obtined, the buyer is supposed to get his deposit back!
Many buyers are being refused credit now and banks are taking forever to lend. I have one at the moment, sale agreed at the end of january – valuation finally being done tomorrow, after several weeks of apparent bank approval!
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@Inez wrote:
Many buyers are being refused credit now and banks are taking forever to lend. I have one at the moment, sale agreed at the end of january – valuation finally being done tomorrow, after several weeks of apparent bank approval!
That was expected and it is a very good news. Who has 100K under mattress to buy overpriced apartments? I guess one could still find about 40% of that…
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Inez, the same is happening in England. The estate agents are calling it bank of mum & Dad. If the parents have cash & they are getting silly interest rates they are lending to their children & sharing the future gains & if live for more than seven year the transfer of such money is ring fenced
from IHT
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