Anyone looking for confirmation that the property market is slowing need only look at the latest adverts for new-builds. Developers, clearly desperate to sell, are offering anything from £2,500 Ikea vouchers to £500 a month towards mortgage costs for two years in an effort to attract buyers.
Incentives aren’t new to the industry – free carpets have been thrown in for years – but the offers have escalated to extreme levels in recent months. Miller Homes was recently offering to pay stamp duty, legal fees and mortgage repayments for the first year on some of its Letchworth properties, for example. On a £209,950 property, this amounts to a £14,000 discount.
“First-time buyer” discounts are also now being offered to pretty much everyone: the Mirror reports serial property investor Chris Christodoulou being offered £15,000 worth of discounts on a £249,995 flat on the basis that taking out a new mortgage made him technically a first-time buyer.
So what’s going on? Simple, says Ross Clark in the Daily Mail. Developers don’t want to admit that prices are falling and they don’t want forced price cuts making it into the house price indices. That might “damage interest from buyers convinced that property prices are likely to go in only one direction: up.” So they use incentives instead. Still, the effect is the same.
Take the Letchworth property. The £14,000 worth of incentive equates to 6.5% slashed off the house price. This cut may not make it into any indices, but that doesn’t mean it didn’t happen.