I decided to buy a one-bedroom flat in Grafton Quarter, a new development in Croydon. The asking price was £327,500. I secured funding from the help-to-buy scheme and paid the £500 reservation fee back in December.
However, the mortgage valuation was £290,000, leaving a large shortfall, so I had to apply to a different lender hoping to get the right valuation. This I managed to do.
Shortly before we were due to exchange in April, the selling agent, Savills, said that since too many lenders were undervaluing the properties, the developer had decided to sell in blocks to investors. I was told I would be refunded the reservation fee and my £1,318 legal expenses, but more than three weeks later the money has yet to materialise.
I’ve since put in an offer on another property and have had to pay another reservation fee and legal expenses so am short of funds.
TM, London
If several different lenders are concluding that some of the flats are not worth the purchase price, uncomfortable questions are raised.
You suspect that the government’s help-to-buy scheme, intended to help cash-strapped households on to the property ladder and stimulate new home building, has encouraged the developer to inflate prices. Your fears may be well founded. The scheme offers buyers interest-free loans worth up to 20% of the value of a new-build home and the big-name developers estimate half their sales are to help-to-buy purchasers.
A report by Morgan Stanley last October revealed that the beneficiaries of the £10bn initiative have been developers who have increased purchase prices by 15% in the four years since it was introduced.
Savills Investment Management, a subsidiary of Savills real estate, bought the former industrial site in Croydon in 2015 and announced that its development would meet the need for affordable housing. It also predicted regeneration of the area would boost property values.
It looks as though surveyors are not persuaded that boost is imminent and with prices of more than £500,000 for a three-bedroom flat, they don’t seem very affordable.
In a letter cancelling your purchase, Savills wrote: “The scheme has, unfairly in our view, had several down valuations since Christmas which have compelled the developer to completely change their sales and marketing strategy.”
However, it tells the Observer it halted sales to individuals to “achieve a sale in a single transaction” rather than achieve a higher price.
It declines to specify how many buyers have been affected, stating that it’s a “small number”. It’s unable to confirm whether the entire development was sold to investment buyers, only that it is no longer marketing any of the homes.
Could it be a coincidence that the day after we intervened, your money was refunded?
Paula Higgins, chief executive of the campaign group HomeOwners Alliance, says that your plight is not unusual. “One of biggest issues of the housing crisis is that developers prioritise profit over all else.
“Our research in 2015 found that consumers overwhelmingly supported Boris Johnson’s proposal to require developers to market homes in the UK before targeting overseas investors. Clearly, offering preferential treatment to UK investors is just as problematic.”
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