Britain's homebuilders, including Tayor Wimpey, Redrow and Bovis Homes, have seen their profits massively cut as the UK’s spectacular, decade-long boom in house prices comes to an end.
According to mortgage lender Halifax, the average UK home has lost £25,000 of its value in the past 12 months, undermining our confidence and leaving us on the brink of our first recession in almost 20 years.
Over the last few months, Barratt Homes and other homebuilders have been using huge incentives to entice us to buy, with shared equity schemes now commonplace.
Now Barratt has said it is prepared to shield homebuyers from a fall in house prices as it tries to inject some much needed life into our slumping property market, which in turn has been affected by what is happening in mortgages.
The struggling builder has come up with the unprecedented offer of paying up up to £15,000 of stamp duty for you (on properties up to £500,000) along with two other incentives offering a part-exchange plan and a 3 year guarantee 'price promise.'
- Shared equity and price promise
Under the shared equity scheme, you will bear 75% of the cost and Barratt will give you a 10 year interest free loan worth 25%.
Under the price promise, if a house sells for less than it was bought for within three years, Barratt will refund you up to 15% of the difference. (*remember this last part as we will go into that a bit later!)
The enticements by Barratt come because it showed a 67% loss in its annual profits as sales tumble. Their bottom line was hit further by a £208 write-down on the value of land it owns and plans to build on.
Barratt's new incentives follow the Government's decision to raise the stamp duty ceiling to £175,000 last week, which the builder deemed "well below the value of many modern homes". Barratt’s average selling price for a home in the 12 months to June 30 fell 6% to £183,100.
Understanding the property market
Buying your first home
* Ok lets go back and visit that phrase: “under the price promise, if a house sells for less than it was bought for within three years, Barratt will refund you up to 15% of the difference."
Notice their choice of words (15% of the difference), which may sound pretty generous but really it only means 15% of the difference between the bought and sold price.
Is it really a good deal if house prices are currently dropping by 20% a year?
So, if you happen to lose say £50,000 in value in your property in the 3 years, they will give you "up to” £7,500.
Equally if you bought a property for £300,000 and have to sell it for £200,000 they will only give you “up to” to £15,000.
Hmmm, you might want to think about that before you rush to sign up for this “great deal”.
What do you think of the Barratt incentive? Is it viable? Would it be better if they just lowered their asking prices?
Why not let us know in the comments?