With the recent rise in borrowing costs, UK housebuilders are responding to shifting market dynamics by providing alluring incentives, such as free cars and home loan contributions.
According to RBC estimates, at the end of October, one in five newly listed homes had attractive bids, which is a notable rise from the historical average of less than one in ten over the previous ten years. These incentives, according to housing economist Anthony Codling, are used to boost sales and cut expenses, especially when builders are eager to move the last few unfinished homes.
First-time buyer sales are declining as a result of high borrowing costs and a squeeze on living expenses, which are posing problems for the housing market. For 2023 and beyond, EY Item Club predicts decade-low growth in UK home loan lending.
Among the companies providing incentives are well-known builders like Barratt Developments and Taylor Wimpey. Taylor Wimpey is now giving mortgage contributions, deposit help, and customized home renovations, with incentives up to 5% of the purchase price. In the southeast of England, Barratt’s ‘Rent-then-Buy’ program enables first-time renters to rent for six months prior to making a purchase.
The market is stabilizing even though the proportion of newly constructed homes with incentives has marginally declined since early August. The opposition Labour Party’s proposed positive modifications to the planning system, in addition to the recent decrease in borrowing costs, could create a more developer-friendly atmosphere.
Anthony Codling of RBC says, “The new-build market is operating in a stable environment – albeit a low volume one,” implying a cautious optimism in the face of continuous market modifications.
