Buy-off Practice Re-emerges in London

A large number of buyers are returning to London to invest thousands of pounds into property, the construction of which will not be completed for at least a year. The fact is being explained by property experts by increased buying activity coupled with shortage of properties for sale in London.
For instance, the statement of Barratt – a British housebuilder – suggests that the company has received 10% of the full asking price for practically 50% of the flats located at 10 Rochester Row, Westminster 6 months prior to construction and a year prior to competition.
Barratt’s statement is warmly welcomed by industry professionals as Rochester Row pre-sales signify a revival of London property market. In fact, pre-sale of Rochester Row flats, which are priced between £700,000 and £2.4 million is the first sign of the market moving back towards its peak of 2007.
It is important to note that the buy-off plan became unattractive with the beginning of the credit crunch as oftentimes a house or a flat cost less upon the completion rather than at pre-sale. However, as the practice re-emerges on the British market, experts say that buyers’ confidence is returning. Unfortunately, the buy-off option is available for cash-rich buyers only as banks and building societies refuse to give out mortgage loans for pre-sale of houses and flats.
Housebuilders are also benefitting from what is going on in the property market by gradually raising house prices. An unnamed insider of the housebuilding company said that as the demand for property is strong and is coupled by actual sales, the firm will take steps to gradually increase the prices.
In fact, property prices in Barratt developments have already increased by 5% in the past 3 months. At the same time, Nationwide has been reporting 1-1.3% increases in property starting from May. On August 4th, Savills claimed that the price of prime London property increased by 4.3% in 4 months (March – June). Marsh & Parsons’ research showed that the gap between the asking and the actual price shrunk from 8.7% in the beginning of the year to 3.9% in July.