Category: News

“Accidental savers” who put money aside during the lockdowns are piling into the housing market and will drive up UK asking prices by four per cent in 2021.

As many as 650,000 properties are due to change hands in the first quarter of next year while fresh buyers will try to find, buy and complete on a new home before the end of the stamp duty holiday window on March 31, according to Rightmove.

“The new year is typically a time for resolutions and many will see it as an opportunity to draw a line under 2020, which may well include a fresh start in a new home for those who have not already acted,” says Tim Bannister of Rightmove.

“Interest rates remain at near-record lows and we expect greater availability of low-deposit mortgages next year. These two factors will help to oil the wheels for home purchases by the accidental savers who have collectively saved £100 billion during the pandemic restrictions.”

The surge of demand to move house following the first national lockdown, stoked by the Chancellor’s tax break, has pumped prices up 6.6 per cent over the last 12 months to December taking the average UK asking price to £319,945.

Pressure is building on the government to agree a tapered end to the stamp duty holiday, even if a full-blown extension now appears unlikely.

There’s still an online petition gathering momentum for an extension – you can see that here – but now the latest request for a phased end to the holiday comes from the Yorkshire Building Society

It says the current cliff edge deadline of March 31 may not give enough time to complete transactions for those who have already agreed sales and had mortgages approved.

So the YBS wants a three month taper – a period of grace allowing any property sales which have been agreed and have secured a mortgage approval by March 31 until June 30 to complete their transaction with a stamp duty reduction.

The grace period would exclude new mortgages approved after March 31, says the building society, and they would not be entitled to a reduction.

Nitesh Patel, strategic economist at Yorkshire Building Society, says: “This is already likely to be a very busy period for lenders and other professionals involved in the house sale process.

“Social distancing measures are likely to still be in place, which will make it more challenging to move at speed.

“As well as helping buyers, we think this is a sensible approach which will ease the pressures likely to build on lenders and the rest of the residential property industry immediately before the deadline. This solution would be help to give everyone involved a better outcome and help more people to have a place to call home.”

His suggestion comes as a new survey suggests nearly one in three buyers will pull the plug on deals if they miss out on the stamp duty holiday.

In a survey of 1,001 purchasers conducted for the Guild of Property Professionals, 31 per cent say they would very likely cancel their move if they had to pay stamp duty.

While there are over 140,000 more people in the process of buying a new home now than this time last year and an estimated 418,000 homes sales progressing to completion according to Zoopla, and with many having been prompted by the stamp duty holiday, there are growing concerns over plans for the re-introduction of stamp duty in April 2021.

With the current threshold set at £500,000 and the average house worth £244,513 many would be set to save in stamp duty.

However, under current plans, from April 2021 the threshold returns to £125,000, leaving those who thought they would benefit from the stamp duty holiday having to find extra cash to complete the move.

Guild chief executive Iain McKenzie says: “If the deadline remains as it is, only a quarter of the sales agreed in January will complete in time. With 140,000 more people waiting to complete sales than this time last year, there will be a significant number of buyers who will have to find additional money for stamp duty if they have not budgeted for it.

“Our hope, and the hope of 71 per cent of the public, was that the government was going to extend the stamp duty holiday, or at the very least, introduce a phasing out period that will ease the pressure on all parties involved, and will prevent a cliff edge.”

Over a third of those surveyed said that stamp duty had a big financial impact on the amount they paid, while a further 46 per cent said it had a medium impact on their finances.

The research also found the average value of the property people had bought or were going to buy was £232,500, meaning the average house buyer would face a stamp duty bill of £2,150.

With a third aiming to push through a move quickly to take advantage of the holiday, McKenzie warns many would not have budgeted for this added cost: “If buyers are unable to complete because of not having the stamp duty money in place, we will see a large number of transactions fall through as a result.

“The signs are there, the stamp duty holiday has been successful, but we need to ensure a smooth transition back to a normal service.”

The survey was conducted online ; all 1,001 were buying a property in the next year or had bought a property this year. The research fieldwork took place in early December by Atomik Research.

The Westminster government has published extensive guidance on the operation of the new Tier 4 Coronavirus restrictions in England.

This includes a section given over to moving home.

The full document covers working from home or at workplaces, educational locations, childcare, events such as weddings and funerals, sport and places of worship.

The entire moving home section is as follows:

“You can still move home. People outside your household or support bubble should not help with moving house unless absolutely necessary.

“Estate and letting agents and removals firms can continue to work. If you are looking to move, you can go to property viewings.

“Follow the national guidance on moving home safely, which includes advice on social distancing and wearing a face covering.”

In addition there is extensive guidance from Propertymark on how agencies should operate in a Covid-safe way.

And a reminder of where the new Tier 4 rules apply: all 32 boroughs of London and the City of London, most of Surrey plus Kent and Medway, Buckinghamshire, Berkshire, Hastings and Rother, Hertfordshire and parts of Hampshire, Essex, Bedfordshire plus Peterborough.

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.”