“Predatory investors” are preying on stricken cladding sites that have been rendered valueless by the government’s Advice Notice 12 issued in December 2018, the FT reports today.
Leaseholders desperate to sell are accepting cash offers for their properties that are tens of thousands of pounds less than recent market valuations.
The negative drivers to homes sales is termed the “Three Ds”: Death, Divorce and Debt.
“The people buying are what I’d call predatory investors,” Mark Hayward, chief executive of the National Association of Estate Agents, told the FT.
“Basically they’ll apply as big a discount as they can by capitalising on the stress of the existing occupant.”
UK leaseholders who are eager to move but unable to sell or remortgage their flats because of cladding issues are accepting bids from cash investors, often for tens of thousands of pounds less than the properties’ most recent market value.
You may not have realised that the Grenfell Tower fire could affect you, but if you own a flat of any height with any type of cladding, or none at all, it probably will. New safety advice on external walls means that the owners of the three million privately owned flats in England could face months of “cladmin” before being able to sell or remortgage.
The FT gives the estimated figure of 17,000 households living in sites with Grenfell ACM (aluminium composite material) cladding. It reported the English Housing Survey stating that there are 266,000 households living in privately owned flats in buildings that are at least 18 metres high, hundreds of which have yet to be checked for other types of dangerous cladding.
Ben Orford, a sales manager, sold his Manchester flat at a site with ACM for £20,000 less than it had been valued earlier in the year.
At nearby Castlefield another flat is being advertised on Rightmove to “cash buyers only” for £70,000 less than the orginal asking price.
Estate agents report that “overseas cash investors are willing to inherit the risk”, but none were quoted in the FT.
The FT added: “In a survey of leaseholders from 117 housing developments this month by the Leasehold Knowledge Partnership, a charity that supports leaseholders, 90 per cent of respondents said the government’s response to the ‘cladding crisis’ had been “no help at all.”
The EWS process has been cobbled together by valuers and lenders to introduce some clarity to the market in cladding blighted properties. But lenders are still windy about the entire sector.
LKP is routinely contacted by leaseholders who sales have fallen through.
Here is an excellent article by Inside Housing’s Jack Simpson explaining the process and why it is not working:
Inside Housing, news, analysis, and comment about the social housing sector in the UK.
Meanwhile, in the Guardian today:
Residents of flats in Greater Manchester facing huge bills to replace flammable cladding have told of “anxiety so extreme I can’t function” and feel they are members of “generation stuck”. A survey carried out by the Greater Manchester High Rise Task Force found 53% of owner-occupiers in tower blocks had been hit with increased service charges after the Grenfell Tower fire.