Market-driven vs developer situation discounts
Hey guys,
Well things are really starting to get back on track now and we are starting to see a relatively unfamiliar sight as we negotiate for property — the “market-driven discount” (particularly in the London marketplace).
Let me explain.
The past two years have seen a massive amount of turmoil in the marketplace. Buyers have been rare and hard to come by for developers. The market was desperate to attract buyers right across the board. In situations like this, the discounts are always the biggest as developers feel driven to drop prices and offer massive discounts. Up to about 35% off a current RICS valuation at its worst in fact!
These are known as market-driven discounts.
The other type of discount is when a developer or vendor has a special need to make sales. It might be an end of year target that needs meeting, the last plot on site or simply a monthly goal. Whatever the reason, this is when we see the developer situation discounts. The great thing about these is that when times are tough in the market, they can add onto the already-generous market driven discounts.
Interestingly though, we’re seeing the developers get more and more aggressive with their pricing. Stock discounts have remained but off plan discounts have dropped to reflect an upturn in the market, especially in London.
We have 20 offers for off plan deals out at this very moment in and around London ranging from 10-18% discount, but guess what? Most developers are coming back with 5% maximum. Such is the current state of market driven discounts.
They’re doing this because they know:
- they don’t want to build if they aren’t making a nice profit,
- that the market is returning and they know that by completion prices will have increased.
We even had a developer put his prices up by £15k – £40k per plot on us because he was so optimistic about prices!
At the end of the day, it doesn’t matter what the type of discount you get because as long as you buy it below value. It also doesn’t matter if prices have dropped — it’s always below value: today’s value. This is the only way to lock in a profit at the purchase which is after all what the game is all about.
If you want to take advantage of some of the market driven and developer situation discounts then give the team a call on 0207 812 1255.
Live with passion,
Brett Alegre-Wood
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