Free cars, mortgage help: UK developers offering sweeteners to 1 in 5 home buyers

london – Britain’s house builders are throwing in freebies such as free cars and home loan contributions in a bid to lure buyers after surging borrowing costs sapped demand.

One in five new homes for sale at the end of October was advertised with sweeteners, according to data compiled by RBC Capital Markets and seen by Bloomberg News.

That is up from fewer than one in 10 over roughly the past decade, according to RBC estimates.

“In a hot market where homes are selling out, then no incentives will be required,” said RBC Capital Markets housing analyst Anthony Codling. “They are used when the house builder is keen to accelerate the sales rate to sell the ‘last few remaining’ so that they can get off site and reduce costs.”

British households are facing a barrage of pressures triggered by pricey borrowing and

a cost-of-living squeeze.

That has led to a slump in first-time buyer sales as prospective home owners stay in rental properties rather than take on mortgages.

Home loan lending in Britain is set to record decade-low growth in 2023 and 2024, according to a report published on Monday by forecaster EY Item Club.

Hayfield Homes – a luxury developer based near Birmingham – this summer offered prospective customers discounts up to the value of a £42,990 ($72,000) Tesla car. The builder offered other incentives, including stamp duty contributions, moving costs and estate agency fees.

The nation’s biggest home builders are among companies offering sweeteners.

Taylor Wimpey said this summer that incentives were running at 5 per cent of the house price, compared with about 2 per cent in 2022, with the company offering mortgage contributions, deposit help and personalised home upgrades, such as kitchen counters and carpets. Barratt Developments launched a “Rent-then-Buy” programme in September across the south-east of England – where house prices are falling faster than in most other parts of Britain.

The offer allows first-time buyers to let the property for six months while their payments build up from an initial 2.5 per cent deposit to 5 per cent.

Still, the percentage of new homes advertised with incentives has dipped since early August, declining from about 25 per cent to just over 20 per cent. That is as mortgage costs have slowly fallen from the 15-year high reached over the summer, helped by a double pause in interest rates from the Bank of England.

What is more, a pledge from the opposition Labour Party to accelerate the country’s sluggish planning system and to build 1.5 million homes over the next term of Parliament may boost sentiment among developers.

“The situation is not getting worse,” RBC’s Mr Codling said. “The new-build market is operating in a stable environment – albeit a low volume one.” BLOOMBERG