“Persimmon increases freehold sales after Government pressure”

Persimmon – whose boss got a £110 million bonus. And note the headline doesn’5 say “stops” leasehold sales of houses … Why isn’t this illegal?

“Persimmon has upped the number of homes it is selling freehold in a sign it is bowing to Government pressure over the sale of leasehold properties.

The company is understood to have changed its sales tactics on a number of sites where it is currently developing homes after concerns were raised about the potential for third party firms to buy up tranches of freeholds, and the high cost of ground rents.

Homes being sold at a development in Melksham, Wiltshire, where a four bedroom house is available for £234,995, are now being offered freehold, where previously only a leasehold sale had been available. Other sites in Penrith, Crewe, Crawley and Bracknell are also now being marketed for freehold sales.

Persimmon, which builds around 15,000 new homes each year, has come under fire for selling houses on leasehold terms to then hold onto the freehold for future sale as an extra source of income. Some leasehold homeowners found themselves on punitive terms with rapidly increasing ground rents and extra charges, or facing spiralling costs to buy the freehold at a later date. There are around 1.4 million leasehold households in the UK in total. …”


One thought on ““Persimmon increases freehold sales after Government pressure”

  1. There is nothing wrong in principle with Leasehold sales – on a long lease (say 999 years) and with a low and stable ground rent. It is very difficult or even impossible to sell apartments with a freehold for instance – they pretty much have to be leasehold.

    The issue is selling leases with ground rents that double every 10 years, which is equivalent to 7.177% per annum. .To put this in context, the average inflation rate over the past 20 years has been c. 2% (see http://www.inflation.eu/images/charts/infl-chart-3-1-26.jpg ).

    If it is a 999 year lease with an initial ground rent of £125 (which sounds pretty reasonable, doesn’t it), then by year 900 your annual ground rent will be £154,742,504,910,672,534,362,390,528,000. (Put it in a calculator and see for yourself.)

    Even on a 99 year lease, after only 30 years, the ground rent will have increased to £1,000 (with inflation taking £125 to only £150) – see how damaging compound interest rates are – and with only 60 left to run this would be a double whammy on the price that you can expect to receive when you try to sell your home.

    But, what is needed is NOT pressure brought behind the scenes – but instead regulation. The reality of capitalism is that greed is an essential part of what makes it work – and the only means of protecting individuals from being exploited by capitalists is through Government regulation. That doesn’t mean that Capitalism is bad, just that it needs to be kept under control.

    Unfortunately the Conservative dogma of “free markets” (where “free” means free of regulations) is that there are no controls on ordinary people being ripped off by greedy capitalists. Remember this every time you hear Conservative pledges to reduce “red tape” – whilst there is undoubtedly some genuinely unnecessary bureaucratic red-tape, most of it has been implemented to protect us from the worst excesses of capitalism, and when the Conservatives abolish “red-tape” in most cases it means more profits for the already wealthy business owners (say top 5%) and less consumer protection for ordinary people (95%).


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