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Pocket Living 'modular construction' flats - a good investment?

Does anyone have experience of Pocket Living? Or do people know whether modular construction flats are good quality (i.e. sound/cold/damp proof) and retain their value, or are they likely to end up in negative equity a few years down the line?

Asked on Nov 6 2017, New Homes in London | Report content

Answers (1)

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  • This is an interesting question as, you're right, many of these units have yet to the test of time. I have yet to see a Pocket Living unit but I believe they are not pre-fabricated and they are built to a decent standard. The advantage is that the apartments are well-located and the developers are paying close attention to design and other features. From an observer's perspective, I've been impressed with what I've seen. But, yes, the units are small so resale might be an issue down the line. My other concern is the over-reliance of buyers of these types of units on Help to Buy. The equity loan scheme allows for first time buyers to borrow up to 20% of the value of the property from the government. They then obtain a mortgage for 75% of the value and place 5% as a deposit. Although the first 5 years of the equity loan are interest free - after this period there is an annual fee of 1.75% + 1%. The fee rate increases annually in line with the retail price index (RPI) of inflation. So these payments will be added to the mortgage costs. The Times recently reported that lenders are perceiving these types of properties as risky when it comes to remortgaging (typically after 5 years) - presumably because they are concerned about the proportion of people's incomes being "eaten away" by the fees. Brokers have warned that homeowners could end up trapped on standard variable rates (SVRs) due to the limited options. With the Bank of England believing that inflation could go up in the coming years, meaning interest rates may follow suit, the total costs (of mortgage payments plus the fees) could end up being unsustainably high. Some have even compared it to sub-prime which may be true (unless the lenders, when underwriting the initial mortgages, factored in the ability of buyers to cope with high SVRs and inflationary pressures on the Help to Buy equity loan fees).

    Answered on Nov 8 2017, Report content

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