Developers are now offering to pay portions of buyers’ mortgages among other lavish incentives, rather than reducing house prices. This trend underscores the lengths to which builders are willing to go to maintain high property valuations while still attracting buyers in a highly competitive market.
Mortgage Discounts: Cash in Hand
One noteworthy approach comes from Fairview New Homes, a housebuilder now promising cash sums up to £30,000. This is tantamount to a 2.5pc discount on mortgage rates spanning two years. What does this mean for the average homebuyer? Well, Fairview New Homes suggests that buyers can channel these savings into diverse expenses, whether that’s purchasing a new car, covering two years’ worth of groceries, or even splurging on holidays.
Buddying Up for Extra Perks
Fairview New Homes isn’t stopping there. They’ve introduced a “Buddy Up” scheme, a dream for friends considering a joint property investment. This package includes a sweet deal of £2,000 for legal costs, a 5pc deposit boost, and a £5,000 John Lewis voucher or an alternative comprising a Stamp Duty grant coupled with a £5,000 furniture pack.
More Than Just a Home: Cars and Lower Rates
Another developer, Stonebond, is challenging the status quo by offering a discounted mortgage rate of 3pc for a two-year term, a sharp contrast to the 5-6pc rates prevalent with high-street lenders. For a property valued at £500,000 with a 25pc deposit, Stonebond pledges to cover up to £16,875 to reduce a 5.25pc mortgage rate to 3pc, a boon to be disbursed when the sale reaches completion.
In a move that marries luxury with practicality, Hayfield Homes has gone a step further, advertising a Tesla car (valued between £40,000 to £60,000) with the purchase of a £660,000 four-bedroom home in Bromham, Bedfordshire. This highlights the creative strategies developers are employing to entice buyers.
Innovative Rent-to-Buy Schemes
The innovations don’t end there. Some housebuilders have rolled out “Rent to Buy” schemes. Here’s how it works: tenants pay rent to the developer for a set duration, which then translates into their deposit when applying for a mortgage. This approach is not just innovative but also eases the initial financial burden on prospective homeowners.
Barratt Developments, a major player, has unveiled a pilot program allowing homebuyers to start their journey with just a 2.5pc deposit. The twist? The subsequent six months’ rent will complement the remaining half of their 5pc deposit. Adrian MacDiarmid, Barratt’s head of mortgages, emphasizes the dual benefit: buyers reduce expenses typically lost to private rent, using that money instead towards securing their new home.
Behind the Curtain: The Strategy to Maintain High Prices
According to Emma Fildes, a buying agent in London, these incentives are tactical moves by developers to sustain high price points in official records. However, she cautions buyers to disclose any perks to their mortgage brokers, as transparency is crucial in these dealings.
Smaller developers, facing their constraints, are more inclined to reduce prices directly as opposed to extending substantial perks. Fildes advises potential buyers to leverage their readiness and financial capability as negotiation tools.
Alex Mosley, another buying agent from Perrygate in London, warns that these incentives might mask inflated property prices. His advice? Prospective buyers should diligently assess how new builds compare against the value in the second-hand market before committing.
A Dip in New Build Prices
Despite the premium often associated with new builds, data from market analysts TwentyCi points to a 9pc decline in the average agreed sales price for new builds between March and July of the current year. This shift indicates potential adjustments in the market valuation of new properties.
Government Targets: A Reality Check
The Government’s ambitious aim, as per its 2019 election manifesto, is the construction of 300,000 new homes annually. However, the Levelling Up, Housing and Communities Committee, a cross-party entity, expressed doubts in July about reaching this figure.
Yet, there’s a silver lining. The committee agrees that the government remains on track to achieve its secondary goal of adding 1 million new homes by the end of 2024, a glimmer of hope for meeting housing demands amidst these market complexities.