Author: Antony Antoniou

Starberry’s chief executive Ben Sellers says this near five-fold increase represents a shift of spending by agents away from portals and towards their own websites and lead generation.

“The Covid-19 pandemic has forced the property industry to evolve and relook how and where they spend their marketing budget. In today’s environment, a business’s digital footprint has become increasingly more important, and we have seen the shift in estate agents putting more focus into growing their own online presence so that they are not as reliant on the portals for digital leads” he says.

“As the new shop window, agents are spending more on their own websites, ensuring that they are optimising their lead capturing, lead generation and lead nurturing tools. We are also seeing agents increase their spend on their communication channels and digital marketing campaigns.”

He adds that while the majority of agents had some digital presence in the past, it was not the prime focus it has become today.

“We have been in the digital sector for several decades and have always had to convince agents about the digital transformation we believed was coming, however, now we are inundated with agents who are realising the potential of their own websites and how leads generated from their own digital channels are actually better quality and cost less than portals,”

Sellers comments: “Because agents were not focused on their own digital presence, they were heavily reliant on portals to generate leads.

“However, agents can achieve phenomenal results that rival those of the portals from their own websites via digital marketing and connecting their social media channels, email, chat and portal leads together in conjunction with their CRMs, to achieve a serious marketing ROI and true lead attribution.”

London Central Portfolio has analysed data from HM Land Registry and has revealed that only 2,936 transactions took place in PCL throughout 2020. That’s fewer than 60 a week on average.

Within PCL – which comprises the City of Westminster and the borough of Kensington & Chelsea – there are 213,000 homes.

The 2020 transaction rate was 42 per cent below the 10-year average and 75 per cent below the peak year, back in 1999 when there were 11,660 transactions.

On the basis of the 2020 data, London Central Portfolio says the typical property in Prime Central London would now change hands only once every 73 years – whereas in Greater London, it’s every 29 years.

Andrew Weir, chief executive of London Central Portfolio, comments: “PCL did not benefit from the price growth experienced by the broader UK housing market during the pandemic. The low transaction volumes demonstrate that real estate in this market is ‘tightly held’ and properties are not listed for sale during times of price suppression, which effectively creates a bottom line for property prices.

“Sellers have been reluctant to place their property on the open market due to a lack of international investors resulting in volumes falling beyond the previous low levels witnessed in the immediate aftermath of the global financial crisis and the years following the EU referendum.

“The latest data also suggests that the stamp duty holiday has had a limited impact on the PCL market and has been more of a ‘nice-to-have’ than a driving factor.”

He says the sector’s fortunes should improve with the easing of lockdown restrictions and a successful vaccine roll out.

“We expect to see the return of some Londoners who look to re-establish their city life. The current lack of overseas buyers presents a short window of opportunity for the domestic market” comments Weir.

The agent – from the London area – wants to remain anonymous but has recently been involved in the sale of a property which included in its online and brochure details, a reference to a dedicated home office.

“This property owner modified a large garden shed to become a sophisticated and comfortable home office, fully equipped for any professional wanting to work from home on either a temporary or permanent basis” the agent told EAT.

“Because working from home, at least as we now know it, has been rare in the past, the details were very explicit. But this ended up with tax office enquiries to the seller about applying Capital Gains Tax on that proportion of the property used for work purposes, rather than purely residential” the agent continued.

The risk of CGT applying to elements of some sales have been raised at different times over the past 15 months as the working from home phenomenon gained momentum during successive lockdowns.

The potential risk to sellers surrounds so-called Principal Private Residence relief, or PPR, and the 1992 Taxation Of Chargeable Gains Act.

Section 224 of the Act states that areas of a private home ”used exclusively for the purpose of a trade or business, or of a profession or vocation” may be denied the PPR relief.

Withers Worldwide, a law firm specialising in business, says on its website: “HMRC apportion any gain on a disposal between the part of the home which does qualify for PPR and the part which does not and only the gain apportioned to the part that is not used exclusively for the trade, business, profession or vocation will benefit from the relief.”

This was the issue at the heart of the concern voiced by the agent contacting EAT.

Last year advice posted on the website of respected financial consultancy RSM stated that HMRC had seen an increase in claims for tax allowances for some household expenditure – on heating, lighting and some basic equipment, for example – as more people conducted their employed work from home.

The advice stated: “What is less well known however is that such claims could lead to awkward questions from HMRC in the future when the house is sold. These could prove very costly.”

It went on to say: “Ordinarily, when an individual sells their main home, this benefits from relief from CGT and no tax is due to HMRC, even if the property has risen quite significantly in value. However, this relief can be restricted and some of the increased value of an individual’s home can be taxable where a particular room in the house is designated solely for business use and is not used personally in any way. This should be considered in any future plans for a dream study.”

The advice suggested the issue could be avoided by having a clear dual purpose for the room – for example, exercise equipment or activities for the whole family in the same room. It concluded: “For those watching the news and admiring the interviewee’s home office set up, bear in mind that they might ultimately be worse off for it and the multipurpose box room might have its own benefits after all.“

The London agent who contacted EAT maintained confidentiality on the outcome of the HMRC enquiry about the vendor’s property in that particular case, but wanted to remind the wider agency industry about the risk of explicit references to single-purpose home offices, especially at a time of relatively rapidly-rising house values and a busy housing market.

An analysis of the portal’s figures by estate agency Knight Frank shows that the shortage is a problem facing the house rather than the flat market.

The number of houses listed for sale was 33 per cent lower over the 12-month period while the number of flats was seven per cent higher.

It is also more acute in parts of the country that have experienced stronger demand due to successive lockdowns. Among the house listings, the number was three per cent down in London compared to a drop of 42 per cent in south-west England.

Knight Frank says part of the explanation relates to January and February which were marked by uncertainty over new Covid variants and the vaccination programme being in its early stages. On top of that, many parents were home-schooling.

Combined, this meant new sellers were reluctant to list their property and we are seeing the effects of that now.

When demand escalated sharply in March, supported by the original stamp duty deadline at the end of the month, the best properties sold relatively quickly.

As those properties went under offer, sellers hesitated as they were unable to find anywhere to move into themselves, exacerbating the supply shortage and putting upwards pressure on prices.

“The current supply shortage represents a bumpy exit from the pandemic and tells us very little about how the property market is going to perform over the next 12 months” says Tom Bill, head of UK residential research at Knight Frank. “The last year has shown the importance of looking beyond short-term distortions in the property market.”

But that imbalance will correct itself in the near future, Bill insists, because in March this year the number of appraisals was above the level seen in January 2020 for the first time in six months – eventually, many of those will make it to the market.

Mortgage borrowing in March rose by a net £11.8 billion pounds, the strongest since BoE records began in April 1993.

Lenders approved 82,735 mortgages in March – some 5,000 fewer than in February – but the March 2021 figure was 45 per cent up on March 2020.

Reaction from the industry has been swift and supportive.

“I expect we will see a robust rebound in mortgage approvals in April fuelled by both the vaccine rollout and extended stamp duty holiday which encouraged more homebuyers to come out of hiding and start house hunting” says Twindig PropTech chief Anthony Codling.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, comments: “Mortgage approvals are always a good indicator of future direction of travel for the market. And although these numbers are a little lower than the previous month, they reinforce what we have been seeing on the ground – buyers are determined to move even though many know the log jam in the system will mean they won’t be able to take advantage of the stamp duty concession before the tapering begins at the end of June.

“Looking forward, we don’t expect much to change although prices will probably soften rather than correct as more people’s requirements are satisfied and balance between supply and demand returns.”

David Ross, Hometrack’s managing director, adds: “Our figures show that April is set to outperform March, signalling further activity to come for lenders.

“Our data shows £150 billion of property transactions were completed in the first 15 weeks of 2021. Running 10 weeks ahead of a typical year, this level wouldn’t normally be achieved until the end of June. At the same time, one in every 50 homes was sold between January 1 and April 15, up from one in every 100 during the same period last year.”

The Resolution Foundation says the pandemic has prompted a search for inside and outside space, but that was unthinkable for many currently living in overcrowded homes.

The Foundation, in a report issued over the weekend, says that since February 2020 average house prices have risen over 10 per cent in the least densely populated 10 per cent of local authorities in the UK.

This is compared to rises of six per cent in the most populous areas.

The Foundation warns that one-in-five children are in low-income households who spent the first lockdown in an overcrowded home, and people of all age groups were more likely to live in overcrowded conditions now than they were at the start of the century 21 years ago.

Cara Pacitti, economist at the Resolution Foundation, comments: “For many families, escaping to the country is no more than a pipe dream, and the overcrowding that they have faced during the pandemic must be addressed.”

The latest house price index, from the Nationwide, says it’s still the stamp duty holiday driving business.

“Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a re-acceleration in April” Nationwide chief economist Robert Gardner says.

He adds that there’s scope for more rises over the summer due to limited supply and a continued desire to move as a result of the pandemic, which continues to inhibit demand for smaller city homes.

But Gardner warns of possible trouble ahead if unemployment picks up as furlough and other government support mechanisms ease.

Agents are nonetheless delighted at the continuing bull run.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The bounce-back highlighted by the Nationwide figures, which we have also seen on the ground, should be sufficient to ensure there is no price correction when the stamp duty holiday starts to taper off at the end of June.

“Continuing shortage of stock, as well as the new government-backed 95 per cent mortgage and furlough support, are providing further assistance for the market.

“Broader rollout of the vaccine and easing of lockdown restrictions is increasing confidence in the economy. This economic recovery is giving an additional boost to housing market activity rather than the housing market supporting the economy, which was the case when the pandemic first struck.”

And the director of Benham and Reeves, Marc von Grundherr, says: “London, in particular, is seeing a slow but steady return to health that bodes very well for the future. There’s a certain energy starting to return to the capital, driven by a move back towards the workplace and a reopening of the hospitality sector albeit with some restrictions remaining in place.”

PropTech entrepreneur Anthony Codling, from Twindig, strikes a different note, saying: “Over the last 12 months average house prices have increased by £15,916, almost £1,000 bigger than the maximum stamp duty saving. The Stamp Duty holiday extension certainly avoided a cliff edge, but is it building an even bigger cliff?”