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Stamp duty holiday generates 140,000 ‘extra’ transactions

The stamp duty holiday has generated 140,000 “extra” transactions in the UK mortgage market but contributed a meagre 0.1 per cent of GDP, according to a report.

In its report, ‘Lessons From The Stamp Duty Holiday’, the London School of Economics said thousands of homebuyers had been helped by the tax break but when it came to consumption the effect was not as great.

LSE distinguished policy fellow Kath Scanlon told FTAdviser in an online briefing: “I dare say there were other tax changes one could have made which would have stimulated more consumption.”

The holiday enabled first-time buyers to avoid stamp duty land tax on up to £500,000 of a house purchase between July 2020 and June 2021. On average, it saved individual buyers £15,000, according to the report.

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The government introduced the tax holiday to stimulate the housing market and to increase expenditure on goods and services relating to housing transactions.

But LSE found the “extra” 140,000 transactions, which it defined as “transactions which would not have taken place without the holiday”, sparked expenses of an average of £16,000 per transaction.

This totalled around £2.2bn, though LSE clarified in its report that this figure could sit anywhere between £1.8 to £2.7bn, “given the very large uncertainties around these figures”.

With the UK gross domestic product totalling £1.96trn in 2020, this means the stamp duty holiday expenditure contributed just a fraction, 0.1 per cent, to countrywide spending.

The biggest values in the stamp duty holiday expenditure total came from bathroom and kitchen renovations. Followed by gas rewiring, and then furniture.

LSE’s report added these values to the pre-sale improvements sellers made prior to putting their property on the market to attract buyers to calculate final expenditure.

For the economy as a whole, Scanlon said the stamp duty tax holiday probably wasn’t “so much” worthwhile due to the spike in house prices, compared to how worthwhile it was for the industry and its employers.

“But this [the stamp duty tax holiday] was chartered at the housing market specifically and it seems to have been successful.”

When the holiday came into force, house prices began to climb, enjoying eight months of uninterrupted growth.

According to the Office of National Statistics’ (ONS) latest house price index, UK average house prices have increased by 10 per cent over the year to May 2021.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Scanlon said it would be interesting to compare the stamp duty holiday with the government’s Eat Out to Help Out scheme.

Whilst the LSE report did not explore this, Barclaycard figures showed the latter scheme prompted a 34 per cent jump in spending on dining out. The Treasury estimated the average claim was about £5 during the scheme’s tenure, totalling to an estimated 80m claims which cost it £400m.

Other contributing factors LSE cited in its report for the rise in house prices, alongside stamp duty tax, included the pandemic induced shift to rural areas with more space.

“The tax holiday was not wholly responsible for house price rise,” said Scanlon. “Consumer behaviours [due to the pandemic] really reshaped the housing market. Though we still don’t know if this is temporary, or here to stay.”

By Ruby Hinchliffe

Source: FT Adviser

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Stamp duty holiday sees 22% rise in monthly property transactions

The Stamp Duty Land Tax (SDLT) holiday has delivered market stimulus that has far outweighed the immediate response to the 2007/08 financial crisis, according to analysis by Search Acumen.

And the current SDLT relaxation has so far triggered a 7% rise in house prices from June 2020 to February 2021, adding £17,265 to the price of the average home in England.

This rise has more than offset the £2,572 SDLT savings made on the average property.

On average 103,724 residential property transactions have occurred each month across England and Northern Ireland since the tax break was introduced, up 22% from the 84,691 average in the 12 months to March 2020.

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Since the measure was introduced, 171,303 extra deals have taken place compared to the pre-COVID period in 2019/20.

Search Acumen’s analysis showed the SDLT holiday of 2008/09 in the wake of the Great Financial Crisis saw an average of 60,048 transactions per month. This was down 27% from the previous 12-month average of 82,378 monthly residential property transactions.

Higher transaction volumes during the current holiday could be partly attributed to lending conditions being more favourable than in the aftermath of the financial crisis.

Strong credit availability has helped property transactions progress despite pandemic-induced disruption to the economy, with the tightening of credit mainly concentrated in the high loan-to-value (LTV) segment of the mortgage market.

Andy Sommerville, director at Search Acumen, said: “This analysis suggests the property market has been far more responsive to intervention compared to the post-financial crisis holiday.

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“The housing market’s strong performance compared to the wider economy highlights the contrast between the current healthcare crisis and its economic impacts, and the 2008/09 crisis which was rooted in financial markets.

“While many households have absorbed income hits and face greater job insecurity, the UK’s financial system has held up reasonably well since the onset of COVID. Lenders did pull back from the mortgage market in the early stages of the pandemic, but the flow of credit has gradually picked up as banks got to grips with the crisis.

“As a result, financing for house purchases has been in reasonably good supply and worked in tandem with the SDLT holiday to generate a level of activity not seen for a decade³, despite the unprecedented challenges of COVID-19.

“However, giving extra support for buyers has had many challenging consequences, from pushing up house prices and negating the average saving to heaping a heavy workload on time-pressured conveyancers.

“Property lawyers have been working around the clock to get people into their homes before the initial 31 March cut off. The conveyancing workload is unlikely to get any lighter given the holiday is now running until June and tapering through to September.

“In the long-term, the industry needs to put conveyancing capacity – not to mention mental wellbeing – at the top of the agenda given the pressure law firms have been under to ensure clients complete on time.

“It is clear the traditional way of performing due diligence on transactions is getting in the way of efficiency, and we need to pivot quickly to digital, data-led solutions that can improve the experience for homebuyers and their advisers.”

Source: Mortgage Introducer

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Is Ending the Stamp Duty Holiday Good for Property Market?

Introducing a stamp duty holiday at the height of the pandemic was commendable but it has over-stayed its welcome, says Tom Bill, Head of UK Residential research at Knight Frank.

With the benefit of hindsight, the stamp duty holiday was unnecessary. The Chancellor was right to introduce it last July but the notion it is needed to support the country’s economic recovery has not rung true for many months – which is a welcome development.

Would activity in the housing market have been as strong over the last year without the holiday? It is doubtful but we would still be talking about a remarkable year compared to initial expectations.

The general election of December 2019 was the catalyst for the release of frustrated demand that had built during five years of Brexit-induced political uncertainty. While Covid initially put this recovery on hold, it was subsequently amplified as people reassessed their homes during successive lockdowns. Then along came the stamp duty holiday.

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Its merits as a way of stimulating wider economic activity are clear but the decision to extend the holiday by six months beyond the original March 2021 deadline is more open to debate.

However, if we remember back to the Budget, which took place on 3 March, it was a time of some uncertainty. Schools had not yet re-opened, less than a third of the UK population had received their first vaccination and a stamp duty holiday had been a welcome boost for those that most needed it.

The introduction of a taper was arguably more significant than the extension. It showed the government had listened to concerns about pressures on the conveyancing system and meant it avoided newspaper headlines about buyers missing the deadline through no fault of their own.

However, in hindsight, a three-month extension and a three-month taper was possibly excessive.

UK house price growth was still only in single digits at this stage but it had been above 5% for seven months and the holiday was already distorting sales patterns.

March was a record month for transactions in the UK and over the year more money was spent in the housing market than since before the global financial crisis. Predictably, sales volumes dropped sharply in April in a similar way to 2016 after the implementation of a 3% stamp duty surcharge for second home-owners.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

It has made the true state of the market difficult to assess. It is the equivalent of looking in the mirror at the funfair – you can make out the overall shape but little of the meaningful detail.

However, the stamp duty holiday hasn’t just squeezed transactions into artificially short periods of time, it has also put people off entering the market.

A tax deadline there is no guarantee of meeting, together with stories of sealed bids, over-worked conveyancing solicitors and a shortage of removals vans will have deterred some – exacerbating already-low levels of supply and putting upwards pressure on prices.

Supply did not pick up after Christmas this year in the way it normally does, due to uncertainty over new variants and the fact many families were home-schooling. Ambiguity over missing the original March stamp duty holiday deadline was just another reason not to list your property.

Market appraisals are a leading indicator of new supply and normally build during the first quarter of the year. In the ten years between 2009 and 2019, the number of appraisals only fell once between February and March. That was in 2016, ahead of the introduction of a 3% stamp duty surcharge in April.

This hesitation on the part of sellers highlights how people crave stability. That is true irrespective of any wider debate about the flaws of a transaction-based tax.

In a similar way to rising interest rates, there will be a financial hit from ending the holiday but the wider point is that it signals a return to normality.

Indeed, the second half of this year should see healthy levels of activity in the UK housing market. There is frustrated demand in the system, new supply is starting to pick up and the labour market is stronger than most economists predicted six months ago.

Almost a year after its introduction, there is no sense the Chancellor was wrong to introduce the stamp duty holiday but there is a strong feeling that it has, thankfully, over-stayed its welcome.

BY PETE CARVILL

Source: Property Wire

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Homebuyers Can Still Benefit from The Stamp Duty Holiday

Homebuyers can still make the most of the stamp duty holiday despite the first phase ending in six days but will have to act quickly, a leading property lawyer has warned.

The first phase of the stamp duty holiday extension – where buyers have not had to pay the tax on the first £500,000 of a property’s value – will end on June 30.

However, some homebuyers are rushing to try to complete before the deadline the second phase – where the first £250,000 is tax free – which will carry on until September 30.

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Simon Nosworthy, head of residential conveyancing at London law firm Osbornes Law, said: “There is a perception that the stamp duty holiday will be over on June 30, but that isn’t the case. There are still reasonable savings to be made until the end of September, but buyers will need to act quickly to make sure they complete before the deadline. I would say that if a buyer starts the process in the next 5 weeks or so they should be confident of completing before the September deadline.”

Simon predicts that the market will remain buoyant despite the lower tax-free amount. He added: “I would expect the lower and the higher ends of the market to remain busy in the next few weeks,” he says. “For those at the lower end the saving on £250,000 is still a substantial amount, while for those at the top end the saving of a few thousand pounds is a drop in the ocean. As a result, I would expect large transactions to be unaffected by the end of the stamp duty holiday’s first phase.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

The main issue for home buyers is that most of the housing stock has already been sold during the last few months.

Simon added: “There is a supply and demand issue as most of the housing stock has been going really quickly. We had one case where the buyer was going for a fairly average 1940s semi-detached but the house went to sealed bids with 12 bidders and each potential buyer had to give reasons why they wanted the property and evidence of their finances. The market has been exceptionally busy, so finding a property to purchase is an issue. However, if you do then it’s not too late to make the most of the stamp duty holiday.”

BY PETE CARVILL

Source: Property Wire

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What the End of the Stamp Duty Holiday Means for the Property Market

June 30th marks the end of the Stamp Duty Holiday at the current £500,000 threshold, with it set to stagger back to the normal rates before the final deadline at the end of September. But what will the end of the Stamp Duty Holiday mean for the property market, and when is the best time to buy a property in 2021?

Below Ross Counsell, chartered surveyor and director at property buyers, GoodMove, shares his thoughts on the Stamp Day Holiday, how it’s contributed to higher property prices and predictions for the year ahead.

When does the Stamp Duty Holiday end?

After much anticipation, the Stamp Duty Holiday in its current format will come to an end on 30th June. Following this, there will be a staggered reduction from the original threshold of £500,00 to £250,00 until the 30th of September. On the 1st October, it will return to the previous level of £125,0001.

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The Stamp Duty Holiday has been a catalyst to the massive boom in the property market and increase of house prices, with more people rushing to buy a property while the holiday restrictions are in place.

Has the Stamp Duty Holiday contributed to higher property prices this past year?

With such high demand for property fuelled by the Stamp Duty Holiday deadline, comes higher average property prices. According to ONS’s latest statistics, UK average house prices have increased by 8.9 per cent over the year to May 2021 and now stand at a mammoth £265,000 2 – the highest seen in the UK in many years.

The Stamp Duty Holiday, as well as demand for more spacious properties fuelled by lockdown, has helped the property market succeed through what has been an immensely difficult year in other industries.

How many people have used the Stamp Duty deadline?

Coupled with the recent First Homes scheme, the Stamp Duty Holiday has given many first-time buyers the possibility of getting a foot on the property ladder. We carried out a poll which found that on average, nearly two in five (39 per cent) Brits have taken advantage of the Stamp Duty Holiday when buying their home in the past year. 3 For that lucky percentage, they are expected to have made significant savings of up to £15,000.

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What does the Stamp Duty Holiday extension mean for the property market in 2021?

As we have seen from HPI statistics across the year, the housing market has become extremely saturated, following people rushing to buy properties to meet the deadline. Mortgage approvals and new buyer enquiries for properties have risen by 44 per cent⁴ with the rise in demand reflecting the inflation of house prices.

In a sense, the government’s exclusion of contract exchange with Stamp Duty may be of benefit in the long run. We can expect to see a decline in demand from October once the deadline officially ends, and expect this to be a better time to buy a property this year before rushing to try and meet the deadline.

Should buyers wait to purchase property until the end of the new deadline?

For anyone looking to purchase a property, the advice is simple – hang fire. If the statistics are reflective of anything over the past year, the Stamp Duty is of benefit to only one side of the coin – the sellers. If buyers can wait it out until the end of the deadline, they should expect to save a significant amount of money on a property.

A home is the heart of you and your family, and with only three months to go until the end of the Stamp Duty deadline, it’s worth buyers taking their time to find their dream property. Such a significant stage of life should not be rushed, as this can cause dissatisfaction in the long term.

So, in the meantime, Counsell suggests doing your research, and really getting to grips with the property market. Before looking to buy, research the area and any streets you’d be interested in living on, so you don’t need to spend time later. Look at listings every day and know exactly what it is you are looking for in a property so when the Stamp Duty ends, you can jump on it straight away. Further, make sure you have a mortgage-in-principle ready to go which will speed up the process once you decide to put in an offer.

Buying a home amidst the competitiveness of the property market can be disheartening for buyers, but it’s important to stay positive and be patient!

BY PETE CARVILL

Source: Property Wire

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Stamp Duty Holiday End Means Buyers Need a Plan B

The upcoming end of the stamp duty holiday in its current format could lead to a significant increase in the number of chains collapsing and means agencies, now more than ever, need to have contingency plans in place.

That is the warning from chain repair experts HBB Solutions, which says agents need to have a clear plan B if things start to go wrong.

The stamp duty has undoubtedly boosted and sustained the market since it was introduced back in July 2020, but the first stage of its phased-out approach is set to be reached at the end of this month (June 30).

At present, any home worth up to £500,000 is eligible for the stamp duty holiday, but after June 30 the nil rate threshold will drop to homes worth up to £250,000 until September 30. From October onwards, the nil rate threshold will return to its pre-stamp duty holiday level of £125,000.

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HBB Solutions has been in touch with some of the high street’s major lenders on their cut-off dates for receiving a Certificate of Title (COT) in order to complete on a mortgage by month end.

HSBC/First Direct                                         21 June 2021

Leeds Building Society                                23 June 2021

Halifax                                                            23 June 2021

Barclays Bank                                                23 June 2021

Precise Mortgages                                       25 June 2021

Meanwhile, Nationwide/The Mortgage Works has provided no deadline, but have said they will need five working days to send the funds by BACS and if the notice is less, they will deduct £20 for the CHAPS payment.

This effectively means anyone relying on mortgage funding has about a week left for their solicitor to complete their work, so the lenders can get the COT next week and release funds in time to beat the deadline.

This, in turn, means there could be many buyers and sellers, relying on the significant stamp duty savings they could make, pulling out late on and leading to the unfortunate but all too common situation of a chain collapsing like a pack of cards.

However, there are ways agents can prevent long chains and fall-throughs from disrupting their business, HBB Solutions insists.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Chris Hodgkinson, managing director of HBB Solutions and a former agent himself, said: “We all know how frustrating it can be when chains collapse. We’ve been fixing them for nearly 11 years now. We typically buy with a discount or alternatively charge a fee, starting from as little as 8%, for our service. But that cost doesn’t have to be absorbed by just the one seller, it can be negotiated across the entire chain to make if affordable and keep the sale of every house together. Even if a sale falls through only days away from completion, we’re here to help and get it back on track.”

Fall-throughs and chains breaking down – how big a problem is it? 

Data earlier this year estimated that one in four sales fall through before completion, costing homebuyers an average of £2,700 each time.

Research from property platform WiggyWam found that, in total, property transactions that fall through are costing UK homebuyers a massive £607m every year.

And there are fears that this number will inevitably rise further as the stamp duty holiday gradually comes to an end in two blocks.

On average, nearly a quarter of am (225,000) fall-throughs occur each year in the property market, costing buyers, sellers and agents alike.

There are a number of different reasons for property sales being cancelled before completion, which typically include mortgage issues, gazumping and gazundering, conveyancing delays, problems revealed in the survey, and broken chains.

Sales that are part of a chain – which is most sales – are especially vulnerable to fall-throughs, as it only takes problems with one part of the chain to cause major issues for everyone else. In particularly long and complex chains – it is not unheard of for four or five sets of buyers and sellers to exist in a chain – the chances of fall-throughs and complications are naturally much greater.

It seems highly likely, given the extraordinary levels of demand at play in the property market right now, that the one-in-four statistic – which others elsewhere have previously suggested is as high as one-in-three sales collapsing – will increase by the end of the year.

“I think we all know the pressure lenders, solicitors, search providers and, in particular, agency sales progression teams will be under in June,” Hodgkinson continues.

“We’re standing by and have our lawyers, resource and, quite importantly, cash funds all in place. We can give you a purchase price within just a few hours and provide a same day completion if it is required. If you have a chain That is not on track, then talk to us, we’re here to help.”

HBB Solutions believes that, even once the two-stage stamp duty holiday has ended, there could be issues with buyers walking away from a sale because they will no longer benefit from the stamp duty saving. In turn, sellers may be less likely to list – or withdraw their home from the market – if they start to panic about demand falling off a cliff.

What is the solution? 

As the old saying goes, failing to prepare is preparing to fail, and HBB Solutions believes that agents need to partner with a firm that can offer alternative solutions to be ahead of the game if the worst comes to the worst in terms of more chains collapsing.

One estate agent partner HBB Solutions is already working with has championed the merits of having a chain repair plan B at its fingertips.

Simon Bradbury, managing director of Thomas Morris, comments: “We find the service and proposition that HBB provide is excellent! In the highly competitive market in which we currently operate, it is increasingly challenging to come up with a genuine and compelling USP to entice prospective sellers.”

He adds: “The HBB proposition is a great ‘insurance policy’ when a chain collapses or a seller needs a guaranteed sale.”

Meanwhile, Relocation Agent Network (RAN) – a national network of estate agents specialising in relocation – has been recommending the services of HBB to its membership for more than two years now.

Mark Westcott, director at RAN, said: “We were impressed by the proposition and the team behind HBB and they were by the quality of the estate agents that make up RAN. The introduction of HBB to the membership has led to many successful deals completed as a result. Our members are now able to market HBB’s services to potential vendors as another option if needed, giving them a competitive edge, as well as promoting a part exchange offering to local developers for any sites they have that don’t have access to that service.”

The remainder of this month is likely to be incredibly busy for agents, conveyancers, surveyors and removal firms, Hodgkinson adds, and then again in the lead-up to the end of September.

Given the pressure on the system, it seems almost certain that there will be a rise in the number of chains collapsing and the number of transactions falling through, and it will be those agents who have an adequate plan B in place who will be best set to cope.

BY PETE CARVILL

Source: Property Wire

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How will the housing market fare after the stamp duty holiday?

The housing market has come a long way since the country entered its first lockdown more than a year ago.

In mid-May last year the housing secretary lifted the freeze on home moves in England – which for seven weeks had been prohibited unless “reasonably necessary” – with Scotland and Wales following a month later.

After the chancellor announced a stamp duty cut in July to “catalyse the housing market and boost confidence”, the market has seen average house prices and mortgage borrowing hit record highs.

But how will the market fare when the current stamp duty holiday ends on June 30?

April slowdown

Statistics show a fall in mortgage borrowing and transactions in the month after the stamp duty holiday was originally due to end.

The latest figures from the Bank of England show mortgage borrowing fell in April, with net borrowing at £3.3bn – down from the record of £11.5bn in the previous month, and lower than the monthly average of £5.7bn borrowed in the six months to February.

And provisional figures from HM Revenue & Customs show residential property transactions dropped to an estimated 111,260 in April, down by more than a third from 173,410 in March (non-seasonally adjusted).

House prices, meanwhile, rose in April, with Nationwide’s index showing prices were up by 2.1 per cent month-on-month, to reach an average of £238,831.

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The building society’s chief economist, Robert Gardner, says the extended tax relief prompted a “re-acceleration” in April, after the previous month saw a slowdown in house price growth in view of the original stamp duty holiday deadline.

However, Tim Bannister, property expert at Rightmove, expects market activity to remain strong for at least the rest of the year, despite the tapering and end of the stamp duty holiday in June and September.

Bannister says: “Right now many of the homes in the huge pipeline going through will not be expecting to make the June stamp duty deadline.”

Homebuyers who miss the June deadline for the stamp duty holiday will see the tax kick in above £250,000 of the property price until the end of September, in place of the current nil rate band of £500,000.

However, last month, a survey of more than 1,000 homebuyers by estate agent Barrows and Forrester revealed four in five (81 per cent) said they expected to miss the September deadline for the £250,000 threshold.

Coming out of lockdown

John Phillips, national operations director at estate agency group Spicerhaart, says the reopening of the hospitality and travel industries will have a greater impact on the market than the end of the stamp duty holiday.

Phillips says: “Buying a house will still be a priority for many, but there will be lots of people booking holidays after a year stuck in the UK and savings may be spent on a few weeks in the sun. This may result in a few people deciding to put a purchase on hold as the UK reopens fully.

“The slight dip in buyers will reduce the rate that house prices are increasing. However, this is a positive for the market, as the record increases were unsustainable long-term.”

Nationwide’s latest index shows annual house price growth reached a double figure of 10.9 per cent in May, the highest level recorded since August 2014.

Right now many of the homes in the huge pipeline going through will not be expecting to make the June stamp duty deadline.

Tim Bannister

Buying agent Henry Pryor also says a predicted increase in supply will help to moderate prices.

A record one in three properties (32 per cent) sold for more than the original asking price in April, according to NAEA Propertymark, compared to the previous record of 19 per cent in May 2014.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Pryor says: “I expect supply to pick up as people start to be more confident about having strangers around their home. This will provide more choice for those wanting to buy and act as a slight dampener on prices.”

Although the housing market has remained open throughout subsequent lockdowns, government advice on moving home in England, for example, recommends homeowners vacate their property during viewings to minimise unnecessary contact.

Meanwhile, government figures show three-quarters of the adult population have had their first Covid-19 vaccine as of June 1.

Beth Rudolf, director of delivery at the Conveyancing Association, also says prices may experience a short-term “blip”, as more properties come onto the market when Covid restrictions are fully lifted and demand drops with the tapering of the stamp duty holiday.

Rudolf added: “As people decide to move to suit their new working arrangements, we might also expect more supply.”

Demand for space to continue

A survey of employers from professional body CIPD found two-thirds (63 per cent) planned to introduce or expand the use of hybrid working, as working from home became more commonplace last year.

Phillips says: “The shift to homeworking has increased the need for an extra bedroom to use as a study, or a garden to build an office in.

“There’s also been a trend away from city centres. Without the need to live in commutable distance from the office, people are moving to larger properties away from the often more expensive cities.”

Indeed, research from Nationwide in April found seven in 10 homeowners (68 per cent) would still be moving, or considering a move, if the stamp duty holiday had not been extended.

Buying a house will still be a priority for many, but there will be lots of people booking holidays after a year stuck in the UK and savings may be spent on a few weeks in the sun.

John Phillips

Nationwide’s Gardner added that shifting housing preferences after Covid was continuing to drive activity. Three in 10 actual and potential homemovers (28 per cent) cited a desire to access garden or outdoor space more easily, and one in five (22 per cent) to escape from a busy urban environment.

Although the country awaits the fourth and final step out of lockdown, buying agent Pryor does not think the demand for more space instigated by the lockdowns will change in the short-term.

Pryor says: “People who can move are looking for more flexible space; room to entertain, to homeschool, to work from home and if we aren’t able to go abroad, to spend the holidays in.

“This is a trend that I expect will continue for the next few years as we start to appreciate the changes brought by the pandemic.”

Kate Davies, executive director at the Intermediary Mortgage Lenders Association, says that while demand may soften following the stamp duty holiday, they do not anticipate a “cliff edge drop” in interest.

Davies says: “Many people are still keen to move irrespective of the holiday, with the Covid crisis having led people across the UK to reconsider their living arrangements.

“It does not seem logical that this trend will suddenly disappear, given the signs that there is still considerable demand in the pipeline, especially among those waiting for price growth to slow, but also from people who have chosen to wait for lockdown restrictions to ease before pressing ahead with a move.”

By Chloe Cheung

Source: FT Adviser

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Factors that impact the UK property market in 2021

It is absolutely fair to assume that 2021 will have its fair share of uncertainty, especially concerning the property market in the UK. In 2020, when Covid-19 came into being, the housing market and the real estate market in the UK and all over the world were severely impacted. While we have seen many government schemes come into play to boost the real estate market and the economy as a whole, no expert can predict with any amount of certainty what the future of the UK property market holds. However, here are some important factors that will have an impact on the UK property market in 2021.

Stamp duty holiday

After the first lockdown, the government introduced the stamp duty holiday in July 2020 in the UK. The stamp duty holiday was a temporary suspension of the stamp duty that needs to be paid by the buyer when he or she purchases real estate. The government announced the stamp duty holiday to boost the buyer’s confidence, revive the real estate market and make housing slightly affordable. Due to its enormous success, the stamp duty holiday has now been extended till September 2021. Whether the government decides to further extend this temporary suspension on stamp duty and how the real estate market will react to the suspension or introduction of stamp duty will have a huge impact on the real estate market in the UK.

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Change in buyer demand

As more and more people have started working from home, there has been a significant shift in buyer demand and the priorities of the buyer. Earlier, potential buyers would look for properties in the city centre which are close to their place of work. Now, homeowners and potential buyers have started looking at properties in the outskirts and the boroughs. One reason is that homeowners and professionals are looking to shift into bigger places as they wish to improve their standard of living since they are not spending more time at home. Secondly, the average price of the property in the suburbs and boroughs is relatively cheaper than in the city centre, which allows homeowners and potential buyers to purchase spacious properties at affordable prices. Also, there has been an increase in demand for properties with spare bedrooms, maybe an outhouse or a garage space, to convert these spaces into work from home offices. This change in buyer demand will certainly play a big role in the future of the real estate market in 2021.

Low deposit mortgages

Earlier, it was very easy for first-time buyers and potential investors to get low deposit mortgages. However, due to the uncertainty of Covid-19 and the increase in unemployment, banks and lenders have drastically reduced the availability of low deposit mortgages, to a point where it barely exists in today’s lending market. However, the UK government has announced a mortgage guarantee scheme under which buyers and investors will be able to secure a mortgage by paying only 5 per cent of the deposit. Low deposit mortgages will have a great impact on the future of the real estate sector. If this scheme leads to an increase in the demand for housing and helps revive the property market, then it will be a game-changer for the real estate industry as well as for lenders and banks.

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Change in the average price of property

What factors affect the price of property? First and foremost, the supply and demand of real estate and housing will play a big role in deciding the price of property in certain areas. Secondly, the availability of mortgages and the rate of interest will play a role in the number of properties that are actually sold. Due to the uncertainty around Covid-19, banks and lenders became very strict about their lending criteria, which took a toll on the housing market. And, the criteria started becoming stricter, the number of mortgages in the market started to fall, hence, there was a significant change in interest rates. Inflation and unemployment also play a big role in deciding the average price of property, as inflation rates and unemployment rates affect the economy as a whole. And of course, political uncertainty caused by Brexit also took a toll on the real estate sector. Therefore, multiple factors, such as the ones listed above, play a big role in determining the property’s average price, which will ultimately impact the UK real estate industry.

Source: News Anyway

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Value of UK house sales to jump 46 per cent this year but London lags behind

The total value of UK house sales is set to reach £461bn this year, a 46 per cent jump on 2020, according to new data.

Property website Zoopla predicts that the current housing market boom is likely to surge to its busiest rate for 14 years.

The forecast comes after data last week showed that UK house prices rose by 10.2 per cent in March, its highest growth rate since August 2007, before the financial crisis hit.

The unprecedented growth has been fuelled by an extension to the stamp duty holiday and new government guarantees for mortgages.

Zoopla said that it expects house sales to reach 1.52m this year, which would put 2021 in the top 10 busiest years since 1959.

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London lags behind

Demand for family homes is diverting buyer interest away from London, with interest in properties in Wales and Yorkshire surging.

London continues to trail when it comes to house price growth at 1.9 per cent, the slowest regional rate across the UK for the sixth consecutive month.

Homes are taking just under two months to sell in inner London, two weeks longer than the 2017 to 2019 average.

Four central London boroughs are registering price falls for a third month in a row, including the City, Westminster, Kensington & Chelsea, and Hammersmith & Fulham.

These areas have been particularly affected by the shutdown of business due to the pandemic.

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The capital ‘will recover’

Despite London’s declining dominance in the housing market, analysts believe the UK’s city centres will recover and thrive as workers return.

“The pandemic has pushed London to the bottom of the house price inflation league, but as we face into what seems to be a solid recovery, there can be little doubt that it will soon be gaining places and rising up the table,” said John Eastgate, managing director at Shawbrook Bank.

“With solid fundamentals underpinning the property market even after the end of the stamp duty holiday, there’s a strong argument to suggest that our cities, London in particular, represent good value today for both homeowners and investors.”

By Damian Shepherd

Source: City AM

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Stamp duty holiday has triggered 22% spike in transactions

The stamp duty holiday has triggered a 22% rise in monthly property transactions, equivalent to more than 171,000 extra sales, according to Search Acumen.

The current tax holiday triggered a 7% rise in house prices between June 2020 and February 2021, adding £17,265 to the price of the average home in England.

This rise has more than offset the £2,572 savings made on the average property.

An average of 103,724 residential property transactions have occurred each month across England and Northern Ireland since the tax break was first introduced in 2020, up 22% from the 84,691 average in the 12 months to March 2020, before the first lockdown stalled the market.

Since the measure was introduced, 171,303 extra deals have taken place compared to the pre-COVID period in 2019/20.

Search Acumen’s analysis shows the stamp duty holiday of 2008/09 in the wake of the financial crisis saw an average of 60,048 transactions per month.

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This was down 27% from the previous 12-month average of 82,378 monthly residential property transactions.

Higher transaction volumes during the current holiday could be partly attributed to lending conditions being more favourable than in the aftermath of the financial crisis.

Strong credit availability has helped property transactions progress despite pandemic-induced disruption to the economy, with the tightening of credit mainly concentrated in the high loan-to-value (LTV) segment of the mortgage market.

Prospective buyers have been able to access relatively cheap medium and low LTV mortgages to finance home purchases during the current stamp duty holiday.

In contrast, homebuyers suffered from lenders pulling back from the mortgage market during the Credit Crunch in 2008/09.

The impact on average property prices during the two stamp duty holidays has also differed significantly.

Since the current holiday was introduced, house prices in England have jumped 7% to £268,291 from £251,026.

For comparison, the stamp duty holiday of 2008/09 saw house prices in England fall 2% to £174,136 in December 2009 from £177,232 in August 2008.

Andy Sommerville, director at Search Acumen, said: “This analysis suggests the property market has been far more responsive to intervention compared to the post-financial crisis holiday.

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“The housing market’s strong performance compared to the wider economy highlights the contrast between the current healthcare crisis and its economic impacts, and the 2008/09 crisis which was rooted in financial markets.

“While many households have absorbed income hits and face greater job insecurity, the UK’s financial system has held up reasonably well since the onset of COVID.

“Lenders did pull back from the mortgage market in the early stages of the pandemic, but the flow of credit has gradually picked up as banks got to grips with the crisis.

“As a result, financing for house purchases has been in reasonably good supply and worked in tandem with the stamp duty holiday to generate a level of activity not seen for a decade, despite the unprecedented challenges of COVID-19.

“However, giving extra support for buyers has had many challenging consequences, from pushing up house prices and negating the average saving to heaping a heavy workload on time-pressured conveyancers.

“Property lawyers have been working around the clock to get people into their homes before the initial 31 March cut off.

“The conveyancing workload is unlikely to get any lighter given the holiday is now running until June and tapering through to September.

“In the long term, the industry needs to put conveyancing capacity – not to mention mental wellbeing – at the top of the agenda given the pressure law firms have been under to ensure clients complete on time.

“It is clear the traditional way of performing due diligence on transactions is getting in the way of efficiency, and we need to pivot quickly to digital, data-led solutions that can improve the experience for homebuyers and their advisers.”

By Jake Carter

Source: Mortgage Introducer

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