A number of developments that started before the credit crunch are due for completion this year and there are concerns that because of the recession the UK is facing an off plan timebomb.
Developers are worried that investors who put down deposits on properties a year or more ago will either discover they can't find a mortgage to cover the balance, or will be prepared to lose their deposits rather than put themselves into a negative equity situation.
According to the House Builders Federation many developers may have to resort to slashing prices to keep off plan buyers interested. But builders are also looking at lobbying the Government to make up the shortfall for first time buyers and considering suing investors who don't pay.
According to John Anderson of Berkeley Homes the industry is facing a mix of tighter lending, falling house prices and soon to be completed developments. 'Banks have changed their rules and this is a big problem for the whole industry,' he said.
Figures from the National House Building Council 69,000 new private properties were started in 2008 and most of these will be completed this year.
According to the Land Registry, the average house price slumped by 15% cent in the year to January thus creating incentives for people who put down 10% deposits a year ago to default.
Berkeley Homes is preparing to take a hard line on investors looking to pull out for strategic reasons. 'We will take each case on its merits. But ultimately it could mean legal proceedings,' Anderson said.
The HBF said it is already lobbying hard for the Government to assist house builders.
