House builder Barratt has introduced a host of incentives to lure buyers back to the property market, including offering to pay stamp duty on homes worth up to £500,000.
With homes at that price attracting stamp duty tax of 3%, that equates to a potential saving of £15,000 for buyers, comfortably trumping the government’s offer to waiver the tax on homes worth £175,000, saving buyers a maximum of £1,750.
Barratt is also promising to pay moving costs and, for those looking to move to a new house, purchase their existing home in part-exchange. Furthermore, the house builder is only asking buyers to cover 85% of the price up front, allowing them to repay the remaining 15% over the next 10 years.
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Tough times, drastic measures
When a company starts offering so many incentives in a relatively short space of time, it smacks of desperation (this notion is further fuelled by the fact that Barratt has seen its pre-tax profits plummet by two thirds in the 12 months to end June).
Unsurprisingly the house builder refutes this allegation, saying it is merely trying to offer additional assistance to buyers at a difficult and expensive time.
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Buyer’s have good reason to be weary
As for buyers, they are staying away because the market is risky – prices continue to fall pretty much everywhere, banks are extremely picky about whom they will lend money to, and there is a general feeling of pessimism in the market.
This in turn is having a massive impact on anyone in the business of selling properties. Recent figures from the Royal Institute of Chartered Surveyors (RICS) found that the average estate agent is selling just one house per week – the lowest number since RICS’ records began in 1978 - while the number of new homes being built has fallen sharply.
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Risk versus reward
It will be interesting to see whether Barratt can successfully tempt cautious buyers back into the market.
The incentives on offer are quite remarkable, but then they’d have to be: New build properties are very much on the front line and thus most susceptible to price fluctuation, making it an extremely risky investment.
This in turn makes mortgage lenders jittery, with many demanding a minimum 25% deposit just to be accepted.
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