Author: Antony Antoniou

If you fear the market will slow after Christmas, think again – Rightmove is expecting several months of frenzied transactions to come.

The portal is forecasting a robust four per cent average house price growth in 2021 across the UK as a whole, after ending 2020 some 6.6 per cent higher.

And it says the current stamp duty holiday has undoubtedly added some extra momentum, but buyer demand was already very high even prior to its announcement in July.

Rightmove reports that sales remain resilient now, 53 per cent higher than this time a year ago, despite the decreasing likelihood of completion by March 31 if a sale is agreed now.

“Our 2021 forecast of a 4.0 per cent price rise is more conservative than the unsustainable 6.6 per cent national average seen this year” says Tim Bannister, Rightmove’s Director of Property Data.

He continues: “There’s likely to be a lull in quarter two unless the stamp duty holiday is extended, but for many buyers its removal will not be make or break, though may lead them to reduce their offers to a degree to compensate for the higher tax, and indeed many sellers may be prepared to help to mitigate their buyer’s financial loss.

“First-time buyers will remain largely exempt, so in most cases will be no worse off. The maximum savings of £2,450 in Wales or £2,100 in Scotland are considerably less decisive than the £15,000 available in England for a house costing £500,000 or more, which does however only apply to a small part of the market.”

Today’s latest Rightmove report says around 130,000 sales were agreed over the last month, up by no less than 44 per cent on the same period in 2019.

A month ago Rightmove said there were 650,000 sales agreed and in the pipeline, many aiming for completion by March 31  to qualify for stamp duty savings.

One month on – and a month closer to that deadline – the figure remains at around 650,000 because 130,000 additional sales have joined the processing logjam and replaced the 130,000 completions or fall-throughs that have taken place in the last month.

Rightmove anticipates there will be a slower second quarter once the stamp duty holiday is over, though cheap mortgage rates leave scope for further modest price growth despite the loss of the tax saving.

Indeed all regions have seen far greater average price increases than the average savings in stamp duty, indicating affordability headroom.

“Pandemic-related uncertainties have been around for nearly a year, and Brexit uncertainties for far longer, and record activity month after month has proved that movers are willing and able to act on their new or existing housing priorities” says Rightmove.

Demand has therefore exceeded supply in 2020 with the number of properties coming to market for the year to date down by 0.6 per cent on the same period in 2019, and the number of sales agreed up by 8.3 per cent. As a consequence the number of available properties for sale is at a record low, indicating scope for some further modest price increases overall in 2021 despite those uncertainties.

Solicitors’ leaders say members of their industry are suffering mental health problems as a result of the workload to meet the March 31 stamp duty deadline.

They are also urging house movers to have realistic expectations about whether they will or will not complete their transactions ahead of the looming deadline.

“Solicitors are working under pressure around the clock to help their clients move both in time for Christmas and ahead of the SDLT deadline” says Law Society of England president David Greene.

He insists solicitors are struggling to cope with the large volume of emails and telephone calls from clients and estate agents all of whom are understandably anxious to know the current position “but the time spent dealing with such enquiries prevents solicitors from progressing matters.”

Greene says the Law Society has lobbied the government twice on this issue in recent months, urging some kind of extension to cope with the workload.

“The next few weeks are going to be very busy with people wanting to complete their desired move before Christmas and our members know an even busier and more stressful time awaits them up to the end of March.

“Consumers must recognise that it is increasingly unlikely that if they sell or buy their house now, that they will complete by the March 31 deadline. The solicitor is often the last link in the move, and it is only when the solicitor has all the pieces, which they are dependent on obtaining from others, that buyers and sellers can move.”

Greene says the conveyancers are limited in their ability to act by the information they get from other sources, also under pressure – delays in the issuing of search results, delays in mortgage offers being issued, problems in the chain and with dependent transactions.

He adds that these are usually outside the control of the conveyancer.

“Firms should manage the expectations of new clients hoping to move before the SDLT holiday ends and support must also be provided to solicitors whose mental health is under strain as they work long, unsociable hours.”

A leading property consultancy is suggesting that a possible increase in Capital Gains Tax could end up losing money for the government, instead of increasing it.

The claim comes from London Central Portfolio, a property consultancy, which has conducted an analysis to assess the impact on the residential market and the wider economy by looking at what happened with previous property tax increases back in 2016.

Then transactions slumped in Greater London by 25.08 per cent year-on-year following the introduction of the additional homes stamp duty surcharge in April 2016.

LCP says annual transactions have never recovered to pre-2016 levels and were down 32.2 per cent prior to the onset of the pandemic.

What if the same trend follows a CGT rise?

“If transactions followed the same trend following the implementation of the proposed CGT changes, an estimated £1.7 billion per annum will, at least, be wiped annually from ancillary businesses in London which service the housing market” claims LCP.

It adds that this damage would be exacerbated by an estimated £630m per annum loss in stamp duty and VAT receipts as property transactions fall and the service sector inevitably decreases.

Andrew Weir, LCP’s chief executive, says: “Tempting as it may be for the Chancellor to target CGT as a cash grab which may be politically popular, the law of unintended consequences may mean it has the reverse effect. Transactions will be effectively ‘brought forward’ ahead of the implementation date, similar to March 2016 where monthly transactions soared to a 12-year high to get ahead of higher rate SDLT.”

He continues: “LCP anticipates that buyer profiles will also change as current owners are replaced by those holding a longer-term view with no intention of selling assets. This would create a transactional lull over the next few years with a further knock-on effect to the UK economy. Businesses that have already struggled due to the Covid-19 pandemic will be victims again.”

Weir believes that with the economy facing a period of slower growth, the Exchequer should be encouraging people to spend their money and boost the economy in the process.

“A rise in CGT is neither certain to increase tax revenues nor likely to stimulate investment in the housing market. It has never been more important to have a well-thought-out strategic approach, looking at all the variables, rather than a short-term tactical ploy” concludes Weir.

A recent report issued by the Office of Tax Simplification, requested by Chancellor Rishi Sunak, has considered an increase in CGT to align with current rates of income tax.

The OTS report anticipates that this could bring an additional £14 billion into the Exchequer and would include increasing the tax on the sale of all properties which are not the main home.

The OTS also raises concerns that “there would be significant behavioural effects, which would materially reduce this, including an impact on people’s willingness to dispose of assets and trigger a tax charge, increasing the extent to which Capital Gains Tax has a ‘lock in’ effect.”

The sales market is currently strong but the Royal Institution of Chartered Surveyors has issued a warning about a slowdown next year when the stamp duty holiday ends.

“There is considerable concern about the prospect of a sharp slowdown in transaction activity following the end of the first quarter of the coming year” says Simon Rubinsohn, RICS chief economist.

“A scaling back in direct government support for the market is part of the reason for this but it is being compounded by expectations of material rise in unemployment as redundancy programmes begin to take effect. Meanwhile, there is little sense that the projected softer sales picture will feed through into pricing which is viewed as likely to prove rather stickier in the face of ongoing macro challenges” he continues.

The latest monthly RICS market snapshot – which is a sentiment index, reflecting surveyors’ views of demand, supply and prices – shows that the sale of homes continued to increase over November.

However, while demand rose for most of the UK “the pace of this growth does appear to be losing a bit of steam and slowing” says the institution.

Nationally a net balance of 27 per cent of surveyors told RICS they experienced an increase in new buyer enquiries during November, well down on the net balance of 42 per cent in October.

In addition, while precisely a quarter of responses saw an increase in agreed sales over the month, expectations for the year ahead remain negative with a net balance of 21 per cent of surveyors foreseeing weaker sales in the year ahead.

Regionally, agreed sales continued to rise across most areas, with Wales and Northern Ireland seeing particularly strong growth for November. However, respondents in the West Midlands, East Midlands and Scotland have started to report a flatter trend.

House prices saw significant upward pressure, with a net balance of 66 per cent of responses citing an increase; a net balance of 20 per cent of surveyors now envisage prices rising in 2021, a big rise from the eight per cent in October

Rubinsohn continues: “A key issue as government looks to continue to build the delivery pipeline will be the response of developers to a tougher market without the incentive of the stamp duty break and the tapering of the Help to Buy scheme.

“Critically, it is not simply a numbers game with the latest price moves highlighting ever more acute affordability issues and the importance of ensuring adequate provision across tenures.”

The sales market is currently strong but the Royal Institution of Chartered Surveyors has issued a warning about a slowdown next year when the stamp duty holiday ends.

“There is considerable concern about the prospect of a sharp slowdown in transaction activity following the end of the first quarter of the coming year” says Simon Rubinsohn, RICS chief economist.

“A scaling back in direct government support for the market is part of the reason for this but it is being compounded by expectations of material rise in unemployment as redundancy programmes begin to take effect. Meanwhile, there is little sense that the projected softer sales picture will feed through into pricing which is viewed as likely to prove rather stickier in the face of ongoing macro challenges” he continues.

The latest monthly RICS market snapshot – which is a sentiment index, reflecting surveyors’ views of demand, supply and prices – shows that the sale of homes continued to increase over November.

However, while demand rose for most of the UK “the pace of this growth does appear to be losing a bit of steam and slowing” says the institution.

Nationally a net balance of 27 per cent of surveyors told RICS they experienced an increase in new buyer enquiries during November, well down on the net balance of 42 per cent in October.

In addition, while precisely a quarter of responses saw an increase in agreed sales over the month, expectations for the year ahead remain negative with a net balance of 21 per cent of surveyors foreseeing weaker sales in the year ahead.

Regionally, agreed sales continued to rise across most areas, with Wales and Northern Ireland seeing particularly strong growth for November. However, respondents in the West Midlands, East Midlands and Scotland have started to report a flatter trend.

House prices saw significant upward pressure, with a net balance of 66 per cent of responses citing an increase; a net balance of 20 per cent of surveyors now envisage prices rising in 2021, a big rise from the eight per cent in October

Rubinsohn continues: “A key issue as government looks to continue to build the delivery pipeline will be the response of developers to a tougher market without the incentive of the stamp duty break and the tapering of the Help to Buy scheme.

“Critically, it is not simply a numbers game with the latest price moves highlighting ever more acute affordability issues and the importance of ensuring adequate provision across tenures.”

The UK has topped the rankings for the highest property taxes as a percentage of overall taxation in the developed world for the second year running.

Just as Chancellor Rishi Sunak appears to be resisting calls for an extension to the stamp duty holiday, and may be considering hiking capital gains tax in next spring’s Budget, so figures from the Organisation for Economic Co-Operation and Development show how heavily taxed the UK property sector is already.

Including both residential and commercial taxes, revenues to HM Treasury from property hit £90.6 billion during the financial year for 2019/20. This is up from £88.4 billion in the previous period.

And according to the OECD, the UK has seen the highest property taxes in six of the last 10 years.

The calculation is based on all resi and commercial property taxes – council tax receipts, business rates and stamp duty, plus the equivalent levies in Scotland and Wales.

The period under review includes only a short time during which estate agencies and other businesses in the UK were given a business rates holiday this year due to Coronavirus, and the figures do not cover the stamp duty holiday period.

Total overall tax revenues for 2019/20 rose to £731.1 billion in the UK, up £25.9 billion on the previous financial year, with property taxes in the UK accounting for 12.4 per cent of overall taxation – so almost exactly £1 in every £8 of all taxes collected.

Second place was the US with 12.1 per cent then Canada (11.6 per cent), South Korea (11.4 per cent) and Israel (10.1 per cent).

Meanwhile the financial services trade body, UK Finance, is the latest group to voice concern over what may happen to the housing market when the current stamp duty holiday ends on March 31.

Its latest Household Finance Review shows that house purchase lending recovered strongly in the third quarter of 2020, with some months seeing activity almost back to the levels seen a year ago.

It forecasts house purchasing to be strong in the first quarter of 2021 as buyers take advantage of the holiday.

However, beyond that point demand is likely to come under pressure, it adds.

The UK has topped the rankings for the highest property taxes as a percentage of overall taxation in the developed world for the second year running.

Just as Chancellor Rishi Sunak appears to be resisting calls for an extension to the stamp duty holiday, and may be considering hiking capital gains tax in next spring’s Budget, so figures from the Organisation for Economic Co-Operation and Development show how heavily taxed the UK property sector is already.

Including both residential and commercial taxes, revenues to HM Treasury from property hit £90.6 billion during the financial year for 2019/20. This is up from £88.4 billion in the previous period.

And according to the OECD, the UK has seen the highest property taxes in six of the last 10 years.

The calculation is based on all resi and commercial property taxes – council tax receipts, business rates and stamp duty, plus the equivalent levies in Scotland and Wales.

The period under review includes only a short time during which estate agencies and other businesses in the UK were given a business rates holiday this year due to Coronavirus, and the figures do not cover the stamp duty holiday period.

Total overall tax revenues for 2019/20 rose to £731.1 billion in the UK, up £25.9 billion on the previous financial year, with property taxes in the UK accounting for 12.4 per cent of overall taxation – so almost exactly £1 in every £8 of all taxes collected.

Second place was the US with 12.1 per cent then Canada (11.6 per cent), South Korea (11.4 per cent) and Israel (10.1 per cent).

Meanwhile the financial services trade body, UK Finance, is the latest group to voice concern over what may happen to the housing market when the current stamp duty holiday ends on March 31.

Its latest Household Finance Review shows that house purchase lending recovered strongly in the third quarter of 2020, with some months seeing activity almost back to the levels seen a year ago.

It forecasts house purchasing to be strong in the first quarter of 2021 as buyers take advantage of the holiday.

However, beyond that point demand is likely to come under pressure, it adds.

Another day, another house price record as the bull market continues.

The latest Halifax index shows prices surging 7.6 per cent to £253,243 in the year to the end of November, with the market in recent months at its strongest since 2004.

The biggest growth of this year has been since the market reopened after the Spring lockdown; prices since June have risen an average £15,000 or 6.5 per cent in six months.

Interestingly, for many these price rises have more than wiped out the typical savings from the stamp duty holiday.

Halifax managing director Russell Galley says: “With mortgage approvals at a 13-year high, the current market continues to be shaped by a desire for more space, the move from urban to rural locations and indications of a trend for more home working in the future.

“And while industry data shows agreed sales and new instructions to sell fell to their lowest level in the past five months, both remain at historically high levels and well above seasonal norms.”

Galley says the 7.9 per cent rise is spurred by the stamp duty holiday, although he says: “The stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.

“The housing market has been much more resilient than many predicted at the outset of the pandemic, and indeed many households remain confident about further price growth next year.

“However, the economic environment continues to look challenging. With unemployment predicted to peak around the middle of next year, and the UK’s economy not expected to fully recover the ground lost over 2020 for a number of years, a slowdown in housing market activity is likely over the next 12 months.”

North London estate agent and former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf says: “These latest figures show how resilient the housing market has been even at a time of further Covid restrictions and economic concerns. However, activity has reduced since, as Christmas is proving an even greater distraction.

“There is no real sign that home buying and selling won’t resume in the early new year, albeit at a slightly slower pace as the prospects of taking advantage of the stamp duty holiday recede.

“There have been few withdrawals from previously-agreed sales and prices are holding up well, supported by the continuing shortage of the right properties at the right prices in the right locations.”

David Westgate, group chief executive at Andrews Property Group, adds: “House prices continue to rise but the market will have its work cut out in 2021 as the economic impact of the pandemic and potentially Brexit kicks in.

“The stamp duty holiday ignited already strong post-lockdown demand and this, coupled with the desire of many people to relocate away from major cities in search of outdoor space, has driven prices higher.

“House price growth will almost certainly moderate in the first quarter and values will come under pressure if unemployment starts to rise sharply as expected.

“The number of major high street firms collapsing suggests house prices are in for a tough 2021. At lower loan to values, we’re not expecting the market to grind to a halt but for first time buyers and anyone with a smaller deposit it’s going to be challenging next year.”

Another day, another house price record as the bull market continues.

The latest Halifax index shows prices surging 7.6 per cent to £253,243 in the year to the end of November, with the market in recent months at its strongest since 2004.

The biggest growth of this year has been since the market reopened after the Spring lockdown; prices since June have risen an average £15,000 or 6.5 per cent in six months.

Interestingly, for many these price rises have more than wiped out the typical savings from the stamp duty holiday.

Halifax managing director Russell Galley says: “With mortgage approvals at a 13-year high, the current market continues to be shaped by a desire for more space, the move from urban to rural locations and indications of a trend for more home working in the future.

“And while industry data shows agreed sales and new instructions to sell fell to their lowest level in the past five months, both remain at historically high levels and well above seasonal norms.”

Galley says the 7.9 per cent rise is spurred by the stamp duty holiday, although he says: “The stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.

“The housing market has been much more resilient than many predicted at the outset of the pandemic, and indeed many households remain confident about further price growth next year.

“However, the economic environment continues to look challenging. With unemployment predicted to peak around the middle of next year, and the UK’s economy not expected to fully recover the ground lost over 2020 for a number of years, a slowdown in housing market activity is likely over the next 12 months.”

North London estate agent and former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf says: “These latest figures show how resilient the housing market has been even at a time of further Covid restrictions and economic concerns. However, activity has reduced since, as Christmas is proving an even greater distraction.

“There is no real sign that home buying and selling won’t resume in the early new year, albeit at a slightly slower pace as the prospects of taking advantage of the stamp duty holiday recede.

“There have been few withdrawals from previously-agreed sales and prices are holding up well, supported by the continuing shortage of the right properties at the right prices in the right locations.”

David Westgate, group chief executive at Andrews Property Group, adds: “House prices continue to rise but the market will have its work cut out in 2021 as the economic impact of the pandemic and potentially Brexit kicks in.

“The stamp duty holiday ignited already strong post-lockdown demand and this, coupled with the desire of many people to relocate away from major cities in search of outdoor space, has driven prices higher.

“House price growth will almost certainly moderate in the first quarter and values will come under pressure if unemployment starts to rise sharply as expected.

“The number of major high street firms collapsing suggests house prices are in for a tough 2021. At lower loan to values, we’re not expecting the market to grind to a halt but for first time buyers and anyone with a smaller deposit it’s going to be challenging next year.”