Take your pick: a £55,000 Range Rover or an expenses paid trip to New York or a “feng shui interior design package” worth £15,000. These are among the latest giveaways dangled by developers in a bid to shift unsold homes.
Housebuilders admit it is the worst new homes slump in living memory. The market has not just slowed, it is at a virtual standstill.
But for buyers this is a silver lining. Incentives are becoming juicier by the day but so are up-front price cuts — a taboo for builders in previous downturns.
The door is now wide open for businesslike buyers to negotiate hard with developers with quite a large degree of success — some seasoned investors are getting 30 per cent price discounts.
'Some offers are imaginative to say the least'
For people who want to buy homes for themselves, the “deal” is likely to be more about the overall package. Now is the time to pick up not only a well-priced home with a few financial sweeteners thrown in, but also a better-quality home in a location that you probably could not previously have afforded.
The array of incentives has widened considerably in recent weeks. Some offers are imaginative to say the least. The feng shui offer is available at Crest Nicholson’s GreatWest Gate scheme in Osterley, where a practitioner will source items and style the home in an appropriate way.
West Country estate agent Bradleys is trying to lure buyers with the offer of a free car if they complete on a property at one of six developments in Newquay, Cornwall. Depending on the cost of the home purchased, buyers are given a new Smart Car, Mercedes or Range Rover.
The lack of mortgage money available has caused much of the paralysis in the market so most developers are focusing on ways to enable buyers to borrow. Although property values are falling, many buyers are still priced out of the market because lenders have withdrawn high-percentage loans.
Taylor Wimpey is offering to lend homebuyers a quarter of the value of a new property interest-free for 10 years. The deal is available at more than 100 schemes. Buyers can choose from a panel of mortgage lenders for the rest of the purchase price.
Dressed up reductions
Most developers are still reluctant to advertise price cuts, preferring to dress up reductions in the form of stamp duty refunds or, as with Gladedale Homes, by offering reduced-rate mortgages, fixed for five years.
One insider says: “Sales staff are slitting their wrists. Basically they will tailor a package of incentives according to what buyers want because they’re so keen to do business. For serious buyers, big discounts are available. If you don’t ask you won’t get. It pays to be cheeky.”
Paid deposits are a tempting sweetener if you are a first-time buyer with little or no savings.
And, clearly, it is worth negotiating hard where the price is a little above the stamp duty thresholds of £250,000 and £500,000. Parking spaces (anything between £15,000 and £75,000 in London) are another obvious bargaining chip.
Developers are also making much of “hassle-free” part-exchange, whereby you trade in your old home for a new one. It can be a convenient way out of the logjam — you can avoid dealing with estate agents and paying their fees. The main risk is that you get a reduced price for the home you are selling, possibly as low as 85 per cent.
Schoolteacher Helen Barraclough used a part-exchange scheme when moving from the north of England to a new job in Sussex, buying a two-bedroom flat at Saddlers, in Billings-hurst. The developer, Barratt, undertakes to pay the full market value of buyers’ existing home and offers a free Home Information Pack and free removals. “I also negotiated a stamp duty refund and got a discount on the price,” says Helen. “It made the move much less stressful.”
The downside of taking any incentive is that you have less scope to negotiate a price reduction on the property you are buying. You have to study the figures and decide whether the “incentive” is really worth it.
In September, a new mortgage code comes into force requiring developers to specify the value of any incentive given to buyers. The aim is to ensure that mortgage valuations are transparent and reflect the true value of the property. In the past, incentives included in the purchase price have resulted in properties being over-valued, say lenders.
Rent before you buy
Nervous buyers unwilling to commit to a purchase in these uncertain times can have their cake and eat it by renting for 12 months with an option to buy at the end of the tenancy.
Oakdene Homes will refund the rent in full for people who go on to buy. This deal is available at The Cape, a marina scheme in Newhaven, and Whitecroft Park, a country house conversion on the Isle of Wight. Call 0800 032 9653.
The new-build meltdown means developers are having to reacquaint themselves with the art of selling homes to nesters rather than investors. Speculative buyers were happy to snap up mediocre flats off-plan at high-density schemes whereas owner-occupiers want a good-quality home.
Arguably, the English are not overkeen on new-build flats on former industrial sites; they prefer a house with a garden, a freehold and no service charge. Sites earmarked for buy-to-let flats may now be reappraised. “Developers will have to look at more established residential areas,” says Andrew Palmer of DTZ Residential.
Robert Soning of Londonewcastle, adds: “Developers who get the design right will stand out from the crowd.”