Buy now, you've never had it so good
Now is the time to buy a fabulous new home. Price cuts are too good to resist
Housebuilders are now selling their new homes at dramatically reduced prices. If ever there was a green light to go out and buy, it is the whopping rate reduction of 1.5 per cent.
With no incentive to save in banks, now is the time to take it out immediately and put it into bricks and mortar.
Housebuilders are offering the sort of price reductions that are just too good to resist.
Affordability is easing across the board - petrol is cheaper, food and clothes are a bargain.
A further 2.2 per cent fall in average house prices in October this year means the ratio of prices to earnings is down from its peak in July 2007. At that time, the average price was £200,000; it is now £168,000, a drop of 16 per cent, the same as in October 2005. All the signs are that it is now time to buy.
'For businesslike buyers in a position to proceed, this could be the best time in a generation to pick up a genuine bargain'
With new-home sales at a 50-year low, housebuilders are desperate to move stock. Reductions of up to 30 per cent are commonly available in London and the South-East, while in the Midlands and some northern cities much heftier discounts are being negotiated on individual sales.
For businesslike buyers who are in a position to proceed, this could prove to be the best time in a generation to pick up a genuine property bargain, a home with a high spec, built on the assumption that the builder would get the money back for the highly styled interior.
Some beleaguered developers are so keen to shift unsold stock that they are resorting to the equivalent of Blue Cross Days, the high-street tactic of offering “further reductions”.
Taylor Wimpey is promoting “one day only, change your life” deals across the Home Counties. “Selected properties will be available at reduced prices only for the day of the promotion and will revert to their original prices the following day,” explains a spokeswoman.
At The Edge in Edgware, Bryant Homes is offering a special half-price deal to first-time buyers who have a minimum five per cent deposit: a £180,000 one-bedroom apartment has been cut to £89,975. At Campbell Square in Milton Keynes, a two-bedroom apartment costing £174,950 now costs £92,475.
The virtual shutdown in the mortgage and credit markets has brought the housebuilding sector to its knees over the past few months. For volume housebuilders, the crisis is deepening.
Profits and share prices have plunged, land in many cases appears worthless, and with no income stream from ongoing sales, builders are in danger of breaching their banking arrangements, which could lead to them going bust. There is even talk of a government bailout, with housing associations mopping up unsold homes for much-needed social housing.
“I have been in the industry since 1981 and have never seen anything like it,” says Alistair Leitch, finance director of Bellway, the UK’s fourth-biggest housebuilder.
Whereas in the past, builders could avoid the embarrassment of making price cuts by instead offering incentives such as free furniture, these sweeteners are no longer enough to entice buyers.
Moreover, under a new industry code of conduct introduced in September 2008, all incentives or “freebies” have to be declared to a buyer’s solicitor and mortgage lender.
Lenders will not include the worth of any incentives when valuing the property, meaning that the mortgage advance is based on the actual net price paid by the buyer, not an “artificially high price” that includes the incentives.
Declaring the value of incentives will drive down prices further, believe industry insiders. One said: “The push for transparency will result in developers lowering prices - I don’t see any other way around it.”
Barratt is making no bones about offering a fire-sale of properties at developments across London. “We are pricing to sell because that is the right commercial approach,” says managing director Adam Lawrence. “Above all, we want people to know that they can buy at today’s price, not yesterday’s price.
“Buyers have to take a view of where the market is. Are we close to the bottom? Probably, yes. Property is a tangible asset, more so than shares, and most people recognise it comes good over the medium to long term.
What we know for sure is that there will be a huge undersupply of homes in the future. At the moment we are selling mainly from stock rather than off plan.”
Any “overcapacity” will eventually disappear, meaning fewer opportunities to buy cut-price new-build homes. Estate agents say there could be a significant shortage of new homes in the South-East within a year or so.
The number of new private homes built in 2009 is expected to fall to a record low of less than 50,000, about third of this year’s output.
“Over the short term, prices are going down but, long term, if there are insufficient numbers of houses around, then property will become more valuable,” says Steve Nickell, chairman of the National Housing and Planning Advice Unit and warden of Nuffield College, Oxford.
'Clearly, it is worth negotiating hard where the price is marginally above the stamp-duty thresholds'
At Viridian in Battersea, Barratt has dropped prices by 27 per cent. A year ago, one-bedroom flats there were selling for £342,000. Today, they can be picked up for £250,000. For more information, call 020 3177 1052. The scheme of 180 apartments is in Nine Elms, directly opposite the famous power station and close to the site chosen for a new US embassy.
Lawrence says that “incentives are less of a clincher” in today’s market. But Barratt will tailor a deal to suit a buyer’s individual circumstances. “Come and speak to us. You’ll be surprised how much support we can give.” Ultimately, the only way to be sure a deal is a good one is to know the local market, prices and specification, inside out.
Clearly, it is worth negotiating hard where the price is marginally above the stamp-duty thresholds of £175,000, £250,000 and £500,000. Barratt is refunding stamp duty on homes worth up to £1 million as well as paying legal fees and moving costs.
Part-exchange deals, where the developer agrees to buy your home at 100 per cent of market value, can be a boon because you get a hassle-free, guaranteed sale with a Home Information Pack paid for. But normally you have to trade up to a new property that is at least 30 per cent more expensive.
At Elektron in Canary Wharf, Barratt has dropped the price of one-bedroom flats from £402,000 to £329,000, a reduction of 18 per cent.
‘The financial downturn is a buying opportunity’
Chiswick residents Martin and Mary Collis got £50,000 off a one-bedroom flat at Great West Quarter, a 773-home scheme in Brentford. The couple are
buy-to-let investors and paid £199,995.
“We’ve targeted this regeneration area because it lies midway between Heathrow and central London,” says Martin, a financial adviser. “For us, the market downturn is a buying opportunity.”
Image gallery: the average cost of renting in every London borough