Author: Antony Antoniou

Gerard Lyons was chief economic adviser to Johnson during his second term as the Mayor of London and played a leading role in the 2016 Referendum, co-founding Economists for Brexit.

Lyons – considered to be an expert on the UK and world economy, global financial markets and economic and monetary policy – is now a senior fellow at the Policy Exchange think tank.

He says: “The current stamp duty holiday should become permanent with stamp duty being abolished on lower valued properties.”

However, he is critical of the current stamp duty holiday which reaches a much-debated cliff edge finish on March 31.

“Temporary freezes in stamp duty are not a solution as they prompt a spurt in demand as people try to buy before the tax is raised again, pushing prices higher, out of the reach of many first time buyers” he writes in a new Policy Exchange document.

He continues: “More generally, as there is a need to improve turnover in the housing market, stamp duty on housing transactions is a bad tax. Ideally, stamp duty should be abolished, but as a first step it should cut to zero permanently on lower valued properties and reduced on higher valued properties.”

Lyons says as far back as the March 1988 Budget the then-Chancellor, Nigel Lawson, announced that multiple mortgage tax relief would be scrapped later that year, prompting a surge in house prices as people rushed to beat the deadline. Now the same is happening with the stamp duty holiday cliff edge, he says.

An even more fundamental issue, he says, is that houses are sold with stamp duty ‘paid on top’ – meaning buyers typically cannot borrow to pay the stamp duty, adding to the affordability problem of raising money to buy in the first place.

“There are often various schemes, particularly if a new build is being purchased, but generally speaking – and particularly if one is looking to buy a home that is not a new build – it exacerbates the financial challenges, particularly for first time buyers seeking to raise a deposit” says Lyons in his Policy Exchange report.

He notes that shifting the burden of stamp duty to the seller rather than the buyer might make it easier for borrowing, but would simply mean the cost was added to the asking price.

“If abolishing was seen as too radical, then another approach would be to lower stamp duty across the board and to cut it to zero permanently on lower valued properties, up to half a million pounds, or so. This would help first time buyers.

“This would imply that the present stamp duty holiday on lower valued properties should become permanent.

“There is a wider issue as to whether the current debate on stamp duty could, perhaps be the first stage in an overall review of property taxation.”

The independent market monitor Moneyfacts says overall mortgage availability rose in January this year for the fourth consecutive month, to 3,215 products – the highest since March 2020.

And since October the total product choice has increased by 42 per cent – that’s the largest four-monthly rise Moneyfacts has recorded since 2007.

The good news for those agents with buyers needing low-deposit loans, is that with 88 more deals on offer compared to last month, the 90 per cent Loan To Value category saw the largest monthly rise in availability of any category. At 248 products now available, this represents a huge 386 per cent growth in availability since October 2020.

“Further positivity for potential borrowers, regardless of the level of equity or deposit they have, may come from the fact that this improvement in choice has been recorded across the LTV tiers with the exception of 95 per cent LTV, where the five remaining deals are specialist products” explains Moneyfacts’ spokeswoman Eleanor Williams.

“Those with 10 per cent deposit or equity might be especially pleased to note that this tier has, for a second month, seen the largest uplift in availability. With products at this level often favoured by first-time buyers and traditionally being seen as higher risk for providers, willingness to extend lending in this risk bracket could be an indication that lenders have confidence in the sector, despite ongoing, wider economic uncertainty” Williams continues.

“After three months at a record low of 28 days, the shelf life for mortgage products has risen to 40 days, giving would-be borrowers a much better chance of securing their chosen deal before it is withdrawn” she adds.

“This, coupled with overall average rates remaining quite static and availability continuing to improve, could imply the mortgage market is now the most stable it has been since the onset of the pandemic last year.”

In detail, Moneyfacts says that the average two-year fixed rate for all LTVs rose for the seventh consecutive month, and the five-year equivalent rose for the second month running.

However, the rises were only 0.01 and 0.02 per cent respectively, and over the last two months, each of these averages has risen by just 0.04 per cent.

Moneyfacts says: “Considering that between September and October 2020 these rates increased by 0.14 and 0.13 per cent individually, this may indicate a levelling off and potential stability returning to the market.”

Barclays’ mortgage division says 30 per cent of purchasers do not offer below the asking price, often because they feel they have a lack of knowledge about the individual house or apartment, or about the local market.

In a study by Barclays Mortgages, just over half of existing owners vow to negotiate more on their next home; this is especially the case amongst existing owners aged 34 or below, whose responses suggest they suffered the highest levels of anxiety when buying first time around because of their inexperience.

Of the different ages canvassed, those buyers of 65 and over felt most comfortable and least stressed about the process of submitting lower offers.

The study comes as many industry figures anticipate tough negotiations on asking prices as the stamp duty cliff edge nears and buyers realise they may not get the SDLT savings they anticipated.

In addition to a fear of negotiating, other reasons for submitting offers of the asking price or above stated by the study’s respondents were a fear of losing the property, fatigue at the length of the house buying process and ‘just wanting it over’, and avoiding upsetting the seller or their agent.

“A considerable number of Britons lack the skills or confidence needed to negotiate successfully on the price of their home. We are more likely to negotiate on a used car than we are on a property, highlighting the unique emotional nature of one of the biggest purchases people make in their lifetime” explains Rob Smith, head of behavioural science at Barclays.

“Understandably the process can feel daunting, particularly if you fear losing out on your dream home, but a successful negotiation can result in extra money to bolster your family finances or invest back into your home.”

While he acknowledges that bargaining is not for everyone, he urges buyers to undertake extensive research on areas, houses and local markets.

He also suggests buyers finding out if there is significant competition for the property, being realistic about their financial limits, and considering whether it’s better for them to negotiate remotely – by telephone or email – than face to face with an agent.

This will involve new £3.5 billion public spending in England now, in addition to £1.6 billion pledged last year.

There will also be an additional tax on residential developers, from 2022, that is expected to bring in £2 billion over 10 years, directed purely to alleviating cladding issues.

Jenrick claims these measures combined will “remove unsafe cladding, provide certainty for leaseholders and make developers pay for mistakes of the past.”

However, for lower-rise buildings below 18 metres with dangerous cladding, Jenrick has pledged only loans for leaseholders with the pledge that repayments will be capped at £50 per month “or far less.” This is likely to be a controversial proposal.

An estimated 700,000 people are still living in blocks with flammable cladding of a kind similar to that on London’s Grenfell Tower, in which 72 people were killed in a fire three and a half years ago.Many of the affected blocks have round-the-clock fire patrols – ‘waking watches’ – funded mostly by collectives of flats owners.

Last year the government announced its £1.6 billion building safety fund and the Ministry of Housing, Communities and Local Government has previously said work was “either completed or under way” on 95 per cent of the residential high-rises identified as having Grenfell-style flammable cladding – ACM – at the start of last year.

The personal scale of the problem is demonstrated in a video interview with Phil Spencer, who has spoken with Giles Grover of the national End Our Cladding Scandal campaign. In a video interview below, Grover says he suffers continual stress and fear, and a £30,000 to £40,000 bill likely to arrive shortly for his personal contribution to his block’s remedial work.

The island is a magnet for high net worth buyers, and one of Countrywide’s most upmarket brands – Hamptons – has recently entered into a partnership with a local agency to attract mainland buyers to the tax haven.

Part of the island’s coastline is scheduled for regeneration, with the Jersey Development Company seeking to build 1,000 new homes as part of a wider scheme.

But Senator Sam Mézec, a former Jersey housing minister, is proposing that foreign investors be banned from purchasing any of the new waterfront units.

This proposal appears to have the backing of the Council of Ministers – the main decision making body of the island’s government.

“Today the government have lodged an amendment to my proposition which, following discussions with myself, accepts that no homes built as a part of the proposed Waterfront development should be sold to foreign investors, and that we should maximise the proportion of affordable homes on the site”  Mézec has told the local media.

In 2019 a campaign called Tax Haven Justice – which wants companies and individuals taxed where they do business, rather than where they are registered – described Jersey as the seventh most “aggressive” tax haven in the world. The Jersey government responded by saying it was “fully compliant” with standards set by “independent global bodies”.

Meanwhile other prime London postcodes have seen sold prices soar – in one case by 54 per cent.

Astons has analysed sold prices across what it calls “the capital’s 10 most high-profile, prime property postcodes” comparing the average sold price since the start of the pandemic early last year (2020) to the average sold price the previous year (2019).

The research shows that despite the initial market instability caused by Covid, sold prices across all Greater London have crept up an average three per cent during the pandemic.

However, the average sold prices across prime central postcodes tell a very different story.

They have fallen 10 per cent on average and a great deal more in selected locations.

For example the W1J postcode in Mayfair and St James’s has been the worst hit with sold prices falling by 40 part cent – down from an average £4.9m to £2.9m.

Kensington’s W8 postcode has seen the second-largest decline falling – down 18 per cent. Then comes SW1X – down 17 per cent; W1S down 15 per cent; and SW1W down 11 per cent.

Astons says five other prime locations have seen price rises during the same period under analysis.

The SW1Y postcode has seen the average sold price in the area climb by 54 per cent during the pandemic, with Chelsea’s SW3 and SW10 postcodes also enjoying an uplift of 23 and 12 per cent respectively.

W1K rose six per cent and SW7 was up three per cent.

“The UK market has stood very firm in the face of Covid uncertainty” explains Astons managing director Arthur Sarkisian.

“Unfortunately, this has not been the case in some of London’s most sought after high-end postcodes, with sold prices falling since the start of last year. This decline in property prices has been due to a number of factors. While nice, the stamp duty holiday saving hasn’t boosted buyer demand amongst high-end homebuyers to the same extent as it has in the regular market.

“Restrictions on travel have also prevented foreign investment to a certain extent while those looking to buy for themselves have continued to opt for more peripheral locations such as Hampstead.

“However, the silver lining is that prime London has arguably become more attractive as a result of lower property values, particularly to foreign investors. The current landscape not only offers a saving where property prices are concerned but also in terms of the soon to be implemented stamp duty increase for foreign buyers as of April this year.”

The latest National Association of Estate Agents Propertymark market snapshot comes with a warning from chief policy advisor Mark Hayward that: “We are increasingly concerned about the pressure … on the property industry with 69 per cent of estate agents expecting to see an increase in failed sales due to buyers realising their sales will not complete ahead of the deadline. It’s important that action is taken now to prevent this and support the property sector.”

His call for action comes as the online petition calling for an extension to the holiday passes another critical milestone – the 125,000 mark – and the government finally agrees to a Parliamentary debate, which will be at 4.30pm on Monday, February 1.

In the meantime, property professionals continue to warn of dire consequences of a cliff edge, and one veteran agent is suggesting the government’s apparent intransigence over an extension could even cost it revenue in the long term.

Agency owner and PropTech entrepreneur David Alexander says in his area – Scotland – the stamp duty equivalent, Land and Buildings Transaction Tax, would actually bring in more money to the Scottish Government if its current holiday was extended.

He says the Scottish Government’s latest figures show that LBTT revenues from Q4 2020 – when the holiday was in full swing – have increased by £38.2m which is a 32.1 per cent year on year rise compared with the final quarter of 2019.

The figure for last month alone rose by 44 per cent which was £18.4m more revenue than the equivalent number for December 2019.

This is because, just as in England with stamp duty, the LBTT holiday has triggered such a large increase in purchases that the ‘no duty’ holiday effects are negated for the Scottish Treasury.

“These figures show that reducing the tax level paid on residential housing transactions has actually substantially increased the revenue the Scottish Government has received. A near 50 per cent year on year increase in revenue during December, at a time when there are few signs of growth in the economy, cannot be ignored” says Alexander, who is joint chief executive of the apropos PropTech platform.

“The reduction in LBTT, effectively forced on the Scottish Government by the actions of Rishi Sunak lowering stamp duty in the rest of the UK in July, has resulted in substantial increases in revenue at a time when it is most needed to restart the economy after Coronavirus” he continues.

“Indeed, there is a case for easing the rates at all levels. The Scottish government has previously insisted on maintaining higher tax rates compared to the rest of the UK for first time buyers, investors, landlords, and properties above a certain value.

“At a time when there has never been a greater need to maintain the financial stability of Scotland, isn’t now the time to reconsider this policy in favour of higher returns over political posturing targeted at its voter base.”

Yesterday we reported that an accountancy firm, Hillier Hopkins, has called for the government to, as a minimum, extend the stamp duty holiday to those properties that have exchanged but yet to complete, or even better, extend the holiday through to September.

And the portal says: “The case is growing for a short, month long extension to help buyers who agreed a sale in 2020, and secure the expected savings.”

In its latest market analysis Zoopla says with so many sales agreed in the second half of last year, and now racing to beat the cut off date, the average time for a sale to complete is over the usual three months and closer to four months.

It says that in a normal year, around 55 per cent of sales agreed in January would complete by the end of the first quarter – the proportion this year is likely to be lower.

What is not clear, it says, is how many individual sales and housing chains are 100 per cent dependent on securing the stamp duty savings.

“The more buyers rely on securing savings, the greater risk of a spike in sales falling through, with a knock-on impact for whole chains of sales. If an extension fails to materialise, buyers across some chains may help to fund stamp duty costs for others in the chain to safeguard completions” says the portal’s report on the market.

In its general assessment of the market, Zoopla notes that recent record Covid cases and calls to uphold social distancing and other restrictions have deterred some sellers.

It says that in the first weeks of 2021, the flow of new homes coming to the market for sale was 12 per cent lower than a year ago.

“By contrast, buyer demand for property has rebounded after the Christmas break – growing even faster than at the start of 2020. In the period to the 17 January, demand for homes is 13 per cent higher than the same period a year ago when the market had started to rebound in the wake of the General Election. New sales agreed are also running eight per cent higher than last year” it notes.

Richard Donnell, the portal company’s research and insight director, says: “Sellers are more cautious however and appear to be waiting for [Coronavirus] case numbers to drop much further before listing their home, or until we see a return to tier based restrictions.

“The strength of the market in 2020 has eroded the available number of homes for sale and this will mean continued upward pressure on house prices in the short term.

‘The most affordable parts of the UK are recording the highest rate of price growth for 10 years up to 5.4 per cent a year. We still expect house price growth to slow towards 1.0 per cent by the end of the year.

“The rush to beat the stamp duty deadline continues and sellers who agreed to buy a home in 2020 would reasonably expect to make the stamp duty saving. Delays mean we expect up to 70,000 sales agreed in 2020 to miss the deadline meaning the case for a short extension is growing.”

The charity Agents Together – set up last year by Michael and Kenny Bruce with prominent industry consultant Sarah Edmundson as chief executive – says only 16 per cent of agency employees believe their employer has been able to help those with mental health issues during the pandemic so far.

The working group – led by Edmundson – comes after 90 per cent of those agents responding to the poll wanting more mental health support within the industry culture.

Some 75 per cent of agents have reported going to work feeling mentally unwell; over half did not reveal this because of the stigma associated with the subject.

Edmundson says: ‘The survey was commissioned to investigate and better understand the complex nature of mental health in the workplace, specifically in estate agency. We believe this to be the first study of its kind in the sector, and the results will help to develop the initiatives of the Agents Together foundation.”

She says the findings show it’s now time to act.

“I am asking agents; business owners and individuals to commit to supporting a cultural shift in mental health awareness and education across the industry.

“Together we can appraise employers approaches and work closely to develop best practice. Not only responding to mental health issues but to pro actively reduce stigma and improve ways in which wellbeing and performance can work hand in hand.”

Agents Together will be conducting further research this year as well as mounting an education programme, which Edmundson hopes will pay off for individual agents and the industry as a whole – in terms of well-being and financially.

“Deloitte’s research in January 2020 suggested that the benefits to businesses who embrace wellbeing are huge, with a return of £5 to every £1 spent on Mental Health in the workplace, and that was before Covid.

“The reality is this is quite unknown territory for many people, and we will aim to be the support that individuals and businesses need.”

Since June last year Agents Together has undertaken some 230 mentorships with 157 volunteer mentors.