According to the latest research by St Trinity Asset Management and LSL Land and New Homes, the part exchange market boomed during 2007 and early 2008, with transactions hitting 36,799 and 32,959 respectively. When house building was at its peak and competition was exceptional, new home builders relied upon part exchange incentives to increase their sales rate. Following the housing market downturn, transactions dropped, and by 2009 part exchange transactions had fallen by 69% year on year to 12,164.
Ian Long, managing director of St Trinity Asset Management said:
“Part exchange transactions are still well below the heady heights they reached when market activity was at its peak, but we’ve witnessed an encouraging upwards trend in the last year. With an easier sale possible, no estate agency fees, and no chain on the home they are buying, part exchange is once again the most popular incentive for home movers looking at new build homes. We anticipate these schemes will become even more prevalent if house building figures continue to pick up.”
There are indications that the new homes market is slowly improving. Private new home development has steadily increased in the last year, with 21% more new homes built in England in Q3 2010 compared with 2009.[ii] In the first three quarters of 2010, 65,800 new homes were built in the private sector – 5,090 more than in the whole of 2009.
Long continues: “As the economy shows signs of life, house builders seem to be steadily upping their activity once again. In a market where transactions are still suppressed by restricted lending and concerns over the direction of house prices, developers are again turning to part exchange to help sell these new homes. We expect new house production to show a similar improvement next year, with an even greater emphasis on part exchange to help boost transactions. As a result, we forecast that part exchange sales will continue their recent resurgence, with a rise of a further 15% in 2011.”
At the end of 2010, developers had approximately 1,060 unsold second-hand homes in their inventories – a 12% jump from approximately 930 a year ago. At the peak of the part exchange market, developers had an estimated 2,830 new build part exchange homes on their books at the end of the financial year (2007).
Ian Long comments: “When the volumes of part exchange sales are high, it is crucial that developers are geared up to handle the sale of their second-hand stock in the most efficient way possible. This is even more vital in a market where prices are expected to fall over the course, as their portfolios will devalue the longer properties remain unsold. Where developers can centralises the property disposal process, but also retain local relationship support, they can efficiently manage the disposal of higher volumes of part exchange stock across the entire country.”
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