Part exchange schemes see popularity surge 36%

The number of new home purchases involving part exchange saw a 36% increase on 2010 totals and is on track to hit nearly 19,600 by the end of the year.

The increase when compared to the 14,400 in 2010 is a significant upward trend in the use of part exchange as an incentive by housebuilders.

In the first 10 months of the year alone, part exchange schemes have been used in nearly 16,400 sales - already 2,000 more than in the whole of 2010.

Despite this resurgence, they remain well below historic levels, when they reached 30,200 in 2008.  

Ian Long, director of LSL Land and New Homes’ Part Exchange Division comments:

“2010 marked a turning point for part exchange schemes, but they have really picked up in popularity among both builders and new home buyers this year.

"At the start of the year, we predicted a 15% increase on last year’s level, but we’re already close to surpassing this mark.

"At a time when transactions are at half their historic peak, part exchange schemes mean new home buyers guarantee a quick sale of their current home with no additional agency fees to find.

"For those looking to move now, it’s one of the few options that will ensure they’ll be in a new home by Christmas.”   

Private new home development has remained subdued, with 6.6% fewer new homes started in the UK in the first half of 2011 compared with 2010.

In the first half of the year 40,090 new homes were started in the private sector - 2,850 fewer than in the same period of 2010.

Long continues:

“Despite the lack of rapid improvement in housebuilding, builders are increasingly turning to incentive schemes like part exchange to help stimulate movement in the new build sector.

"In the current market, mortgage finance issues at the bottom of the chain often prevent the sale of larger new builds, but the part exchange process cuts out the chain altogether.

"This is boosting developers’ sales, and financially contributing towards further building. While the market remains depressed, we anticipate the take up of part exchange schemes to continue to grow.”

Developers currently have approximately 1,511 unsold second-hand homes in their inventories, an increase from 1,100 at the end of 2010.

At the peak of the part exchange market, developers had an estimated 2,320 new build part exchange homes on their books at the end of the financial year (2008).

Ian Long comments:

“As developers’ commitment to part exchange schemes increases, it’s crucial they consider the timely and efficient disposal of second-hand stock.

"With property prices falling in many parts of the country, the longer properties remain unsold, the more the portfolio will devalue."