by Dan Trivedi
14:56 PM, 25th January 2023, About A week ago
So scrolling through Facebook, Insta or TikTok you’ve properly been bombarded with wanna-be gurus reciting the power points of the developer field views website on this new ‘groundbreaking’ SAVE TO BUY scheme
(Side note) why do these people think reading word for word off a website, is a valid ‘opinion‘ to their viewers? I’ve never understood that. If you are experienced, wealthy, and successful why do you not give your own opinion of insight – instead play the safe game and read the facts – where’s the fun in that???
Anyway! Back to this new ‘game-changing’ Save to buy scheme.
On the face of it, it sounds like the holy grail for people struggling to get onto the property ladder.
– all you need is 1% of the Purchase price (which you agree now)
– you exchange contracts (now)
– you pay rent, for up to 2 years
– of which 100% goes toward the deposit needed
Wow, I hear you cry! Quick first-time buyers, rush to fieldviews website and get reserving any house as it’s first come first serve……… “this is the best deal for me! Right”…….. errrrrrrrrrr WRONG!!!
Sorry ‘just done a course Sally on fb’ and apologies ‘Timmy the TikTok mortgage guru’ I have bad news for you!
Let’s get real! The DFS sale never ends, the price you pay isn’t 50%+20% off!
And although you clicked the black sale link with 90% off – the reality is, that JVC-oshiba tablet you’ve never heard off was in fact cheaper in September from argos.
The market has dropped; in some cases 30-40%. But nationally around 10% from the ‘meat market buyer’ of the height
Now I have my opinion and it is the market has already bottomed out (but that’s another story for another article), but the general consensus from the media and these ‘follow the leader gurus’ is the market will continue to fall.
So as a new home builder how do you hedge your bets? How do you can secure a high price today, which allows you to sell a lot of stock today, which mitigates you in a declining market if interest rates go up and mortgages become unaffordable??? Hmmm give up?
You find a way to exchange contracts now, you create a demand which creates a rush of buyers, which means you can set your own prices – which are HIGH PRICES!
In fact the small print means if you don’t buy your new home within two years, you loose that 1%. And that high rent you and your future Mr or Mrs have budgeted to stomach for next two years because “it goes toward our deposit”
Gets lost in being converted to actual rent.
“So hang on, Mr Guru Trivedi. Are you telling me the builder can’t really loose? He either sells a lot of stock now, at high prices, hedging against a down turn in market or a reduction in buyers if interest rates go up… but if the buyer doesn’t complete they keep the 1% and likely what will be 5% of the purchase price per year for 2 years? That’s around 11% allowing for a reduction in price.”
“Wow why hasn’t anyone else said this”
Because they are all stupid wannabes – (applause)
But all joking aside – this is a sign that some new home builders are worried.
We can agree to disagree if they are going to be correct or not.
If I was a first time buyer I’d be getting a LISA (Life time ISA) I’d chuck my £4k in per year and take my £1k free bonus from the government.
I’d then walk in with Mrs Trivedi who’s done the same and I’d negotiate, negotiate & negotiate down, down, down! I’d ask for every extra going from the furniture in the show home right through to the tuff along with the garden gnomes!
There’s little point in paying over the highest recorded prices in history, just to put down 4-5% less deposit.
Then again there was zero point in paying 10% more in 2016 when Mr Osborne introduced the 3% Stamp duty levy for investors – but we can’t all be old wise sovereigns. A fool and his money are easily parted. And if history has taught us anything people + property = easy targets.
Now to render the whole article pointless, I’m going to contradict everything I’ve just said!
The strength and power of property means if you can’t follow my advice above, and you have zero means (I mean no other way) than to use this save to buy or stay living with your girl fiends in her mum and dad’s garage – then you should consider it.
Because although you will be paying way over, risking yourself not being able to afford the final mortgage when you accumulate the deposit. You are still getting on the property ladder. You are still able to make that step to ownership. You would have effectively lived rent-free for two years, which can go some way to overpaying by as much as 10%.
And by owning, and not needing to sell short term, prices will recover. Prices will eventually exceed what you paid, and the return on your gamble will eventually pay off (albeit slower than if you go the route I’ve laid out) you will be a homeowner and finally break the mould of your renting heritage.
And for that, although I don’t like the scheme – it does give those with no hope, a way to climb on, be a homeowner and look to start building wealth.
AND get buying!!!