The property market is booming. Recent research by Hamptons International
estate agency finds there are eight buyers for every seller. The average
British house, it was reported last week, now costs a record £205,286.
So when Fairview, a developer that operates in London and the southeast,
offers to pay buyers’ 5% deposit for them and will cover the cost of stamp
duty on one of its new flats at its Centrale development in Epsom, Surrey,
the question is “why?” — especially when they are throwing in a season
ticket to London, worth £1,576.
Fairview, which also offers first-time buyers a £250 per month mortgage
subsidy for the first 12 months at a development in West Drayton, Middlesex,
as well as paying the deposit and stamp duty, is not alone.
Developers of new-build properties are coming up with increasingly attractive
freebies to lure potential buyers. Contributions to a deposit and stamp duty
are becoming standard, while some will also offer to assist with moving
costs, pay legal fees and offer “cashback” to help with buying expenses.
More unusually, one developer arranges a “meet the neighbours” night for
those who have put down a deposit, and will send round a handyman to help
buyers put up shelves once they move in.
Even at the top end of the market, sweeteners are on offer: cash buyers can
sometimes obtain discounts, while some developers offer discreet luxuries —
such as the discounted health days at the Harrods spa and free premium
membership of the Carlton Tower gym given to buyers at Trevor Square, a
Crown Dilmun development in London’s Knightsbridge, where prices started at
£1.7m in 2003 and now sell for more than £4m.
Potential purchasers at Ballymore Properties’ Pan Peninsula scheme in Canary
Wharf, Docklands, meanwhile, are being lured by the promise of a residents’
cinema and free membership of Quintessentially, an exclusive concierge
service.
If you are a celebrity, of course, the world is your oyster: do a little free
publicity for a development and you could save yourself 10%-15% on the
price, plus the show furniture. If a developer boasts that a Premier
footballer or television soap star is buying one of its flats, you can bet
they are not paying the full price.
Whatever your status in life, it seems, if you shop around you could save
yourself some serious cash. But why, in a market that is apparently going
mad, do such incentives exist?
“Offering incentives enables us to increase our market share,” explains Jim
Holliday, sales director at Fairview. “We pride ourselves on turning renters
into buyers.” In other words, first-time buyers with little cash to spare
have to be lured in; paying their deposit or stamp duty for them is a
sure-fire way to do it.
Holliday admits sales incentives vary according to the time of year, so what
is available today might not be on offer next month. Put more bluntly, if
the developer’s financial year is coming to an end and the company has to
hit sales targets, it often has to sell houses as quickly as possible.
The terms and agreements on some incentives bear witness to this, too: to
qualify for the discounts available at Centrale, for example, a buyer must
be able to exchange contracts within weeks. Speed is equally important at
the upper end of the market.
“What the developer wants is fast exchange and completion,” says Robin Rixon,
sales and marketing director at St James Homes, a top-end developer. “If you
get a buyer who can exchange contracts the day after tomorrow, then you’d be
a fool not to take it — especially if you’ve got a house sitting there worth
£10m — that’s £10m you could be using to build another house.”
Encouragements to buy speedily should be approached with caution, however,
especially if the developer is putting you under pressure to sign up quickly.
“They’ll do anything except drop the price,” warns Helen Adams, managing
director of first-time buyer website FirstRungNow.com. “You have to remember
that new-build properties tend to market at quite a significant premium, so
be aware of what you’re getting yourself into.”
Adams advises adding up how much the incentives on offer are worth before
committing yourself. Fairview, for example, requires the purchaser to pay a
5% deposit plus a £2,000 holding fee to exchange contracts; although both
sums are refunded on completion, a buyer will have to come up with the money
in the meantime. Also, read the small print when it comes to the stamp duty:
on properties costing more than £250,000, taxed at 3%, the developer will
pay only the first 2%.
Taken together, the incentives on offer for a two-bed £269,995 flat in
Centrale are worth £20,476. A search on property website Primelocation. com,
however, reveals two-bedroom flats in new and well-tended blocks for around
the £185,000 mark — with one in the area going for £155,000. At this price a
buyer would only have to pay stamp duty at the lower rate of 1% — £1,850 on
a £185,000 property.
Mortgage deals also warrant a close look. While growing numbers of developers
pay towards the loan, this could tie you to a specific product that might
not be as good as one obtainable elsewhere. Similarly, gifted deposits may
still require some sort of a financial down payment in the first instance,
even if it is then refunded.
There is also the broader question of whether you should be buying into a
new-build project at all, especially if it is being targeted at investment
buyers. If the market turns or interest rates rise sharply, they could be
much quicker to sell up than owner-occupiers, hitting the value of your own
property.
The key, it seems, is to work out whether a new-build with all the glittering
incentives on offer will be worth it in the long run. Ed Lewis, head of
London new homes at Savills, puts it bluntly: “Quality is selling at full
price and inferior product is still needing to be offloaded. That is what it
boils down to.”
Fairview, 0800 731 4477, www.fairview.co.uk;
Pan Peninsula, 07000 720 720, www.panpeninsula.com;
Trevor Square, 020 7590 9911, www.trevorsquarelondon.com
Is the housing boom over? A panel of experts give their views on whether
interest rate rises have taken the steam out of the market. See today’s
Money
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