The REalyst has talked before about changes on the horizon for the real estate industry, but it doesn’t come much more left-field than giving away homes in a prize draw. In a landscape where innovative solutions are emerging to keep the UK property market fluid, can we expect to see more property raffles in the future?
Read Time: 5 minutes
House prices continue to rise, as the 12 months to January 2019 saw an increase of 1.7% according to the UK House Price Index. The UK finds itself in the midst of a housing crisis where there aren’t enough homes to fulfil demand, and too many people are being priced out of getting on the property ladder.
Over the years, Help to Buy schemes have come to the fore, with each one designed to make buying property that little bit easier. In the private rental sector, build-to-rent developments have emerged as a viable alternative to renting from private landlords. While these schemes don’t solve every problem, they do at least offer some form of a solution.
There are occasions, however, where out-of-the-box solutions are needed to fathom the biggest of problems. And it doesn’t come much more left-field than giving away homes in a prize draw.
You read that right: a new trend in the UK housing market centres around charging the price of a lottery ticket for the opportunity to ‘win’ a new home. But is the idea of giving away homes effectively ‘free’ set to become the norm in the world of buying bricks and mortar?
The concept is relatively straightforward: tickets go on sale for a property, with the aim being to sell enough to, at the very least, cover the asking price. Tickets are typically on sale for anywhere between £2 and £20.
Participants then purchase a ticket much in the same way they would buy a lottery ticket, with the hope of their name being pulled out of the draw. Websites, developers and homeowners have all attempted to sell property using a prize draw, in what is an attempt to speed up a seemingly slow property market.
It is hard to argue against someone owning a mortgage-free home for the price of a lottery ticket. With many struggling to raise the required funds for a deposit, spending a couple of pounds on a raffle ticket is a fairly low risk strategy from the buyer’s point of view.
From the seller’s perspective, it’s a way to speed up the market and, in the early stages, drum up attention around the fact your home is for sale. Homeowners struggling to sell their property via traditional means will likely welcome more opportunities to do so with a raffle.
Potential buyers will be intrigued by the idea of buying a ‘lottery ticket’ to win a home, but it’s too much of a gamble to be their only method for house hunting. In much the same way you can argue that playing the lottery isn’t a solid blueprint for making money, gambling on ‘winning’ a home isn’t a watertight method for finding a new abode.
For sellers, there is an issue of volume: they need to sell a hefty amount of tickets to break even, let alone make a profit. If they don’t sell enough tickets, they’re faced with pulling the plug on the prize draw, which will leave many disgruntled punters. The alternative is making a loss on their home.
So far there have been mixed reactions to the method of selling your home via raffle tickets. One woman spent £20 on tickets for a six-bedroom manor house in Lancashire and won the property, which was worth £845k. The sellers raised £998k – covering their legal costs, outstanding mortgage and left them breaking even.
However, there have been instances where selling houses for lottery ticket prices haven’t been as successful. Two property developers who renovated a flat in Kensington, London refused to hand the home over to a winner after it emerged they only sold £227k worth of tickets. Instead, they gave the winner a £53k cash prize, a paltry sum in comparison to the home value of £2.5m.
A property raffle website WebAbode came up with the idea of selling tickets on behalf of sellers, allowing them to list their property on the site. They came in for criticism with Advertising Watchdog over the legalities in their terms and conditions. As of today, their website is no longer active.
There are several issues around the phrasing of how someone sells their home via tickets. The Gambling Commision makes a clear distinction between a prize draw and a lottery. In fact, lotteries can only be used for good causes, with the winnings unable to be used for personal gain.
Therefore, vendors need to offer their home as part of a prize draw, which means that entrants need to demonstrate some form of skill to win the prize. To get around the legalities, many vendors ask a simple question that entrants must answer before purchasing their ‘prize draw’ ticket, much like a reCAPTCHA response test like when signing up to a new online platform.
Any prize draw also needs to feature an allocated number of free tickets, meaning vendors have to give away a percentage of tickets without charging for them. The Gambling Commission generally disapproves of prize draws, which already puts those that want to sell their home via such means on the back foot.
Though the idea of selling your home via a prize draw is unconventional and creative, it certainly holds some weight as a viable method for buying and selling bricks and mortar. However, it’s highly unlikely that it will replace the traditional forms of selling your home anytime soon.
Teething problems, coupled with the high volume of tickets needed to be sold to make a profit, means prize-draw houses have a long way to go before they’re universally accepted. But, in a landscape where people are looking for solutions and innovative ways to sell property, it’s an alternative option for buyers and sellers in the UK to keep the property market fluid at the very least.
© Treex 2020