Hadn\’t thought of it this way

But there\’s some obvious sense in it.

…the continuing collapse in prices of new flats in those blocks that have sprung like mushrooms across the south-east should surprise no one. Did their buyers never wonder why the sales prices were a third higher than equivalent Victorian and Edwardian properties nearby? Did they never ask who was actually paying for the 30% – 35% of units to be built as \’social housing\’? Now of course private owners of flats in these blocks are waking up to the fact that a third of their monthly mortgage payments are buying the flat for the housing association tenants down the landing.

3 comments on “Hadn\’t thought of it this way

  1. Err, you know economics? Raedwald doesn’t.

    If the new-build flats sold for 30% more than existing Victorian and Edwardian properties nearby, that’s because buyers believed they were worth 30% more than existing Victorian and Edwardian properties nearby – otherwise, prices would have converged.

    In fact, the most likely reason the new build flats listed for 30% more than existing properties is that builders across the board granted a discount of just over 30% for buying off-plan. Which also means that any fall in real new-build flat prices should be taken from 30% below list, not from list.

    How were the ‘affordable’ flats funded, then? Well, the marginal cost of *building* them compared to building the same development without HA flats, which is low, is covered by the money paid by the HA to the builder.

    What about the difference between building cost and the theoretical value of an HA flat? Well, that’s borne by other local residents, assuming that the purpose of the planning laws is to protect local residents from overpopulation (because in the space where the developer would otherwise have been given permission to build 20 full-price flats, he’s received permission to build 20 full-price flats and 8 affordable ones)

  2. Pingback: Banditry » Blog Archive » Another house price post

  3. As I’ve posted on Raedwald, It doesn’t work like that- the flats are worth what they’re worth as a builder you have very little control over the price that you set for your product- that is done by the market.

    The social flats are priced in at the start of the project and the land value is adjusted accordingly. It’s the orginal landowner who bears the cost not the new residents.

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