Housebuilders are having to resort to desperate measures if they are to survive the problems in the housing market, which have seen sales plummet as buyers can't get a mortgage or choose to bide their time until house prices fall further.
As the British Bankers Association (BBA) reveals that purchases for June dropped to record low levels of growth, and are 67 per cent lower than in June last year, housebuilders are offering to pay the mortgage deposits for homebuyers as an incentive to buy.
From June 2007 to June this year there has been a 23 per cent fall in the number of mortgage approvals, the BBA found. And, in its monthly report, the Bank of England confirmed the gloomy news for the housing market, saying that four out of 10 homebuyers pull out of a deal before a contract is exchanged.
Estate agents have reported significant increases in the number of transactions that are falling through, due to the usual suspects – sellers refusing lower offers, lenders withdrawing mortgage
products, or buyers pulling out through fear of losing capital as house prices continue to fall.
Some estate agencies reported that some house building companies are paying deposits themselves or offering shared equity schemes. They are becoming desperate to shift the properties which are piling up and preventing them from starting new developments.
(Confederation of British Industry) has also contributed to the bleak outlook, reporting that the construction sector has lost 10,000 in the second quarter of 2008, that consumer demand is down, but that retailers will have to continue pushing up prices to recover some of what they've lost from increases in cost.
"Cost pressures on manufacturers have been noticeable for over four years but in the last three months they have been their most intense for nearly three decades. Ian McCafferty, the CBI’s chief economic adviser, said.
"So, it comes as little surprise that manufacturers are passing some of these higher costs onto customers, although this is unlikely to rescue profits from a margin squeeze. The record oil price peaks in the last three months have pushed down further on business confidence and lowered firms' expectations for demand in the coming quarter. Even exports, which so far have helped bolster manufacturers' order books, are expected to soften despite the boost to competitiveness from weaker sterling."
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