The first clues are emerging about what might happen to the housing market after the stamp duty holiday gradually wanes and how the race to beat the deadline has pushed sales forward.
After a frantic final stage for agents, mortgage brokers, banks, transport agents and, of course, buyers and sellers, a leading real estate agent has revealed that trade has fallen to 40% of the five-year average in the first week after closing. .
According to Knight Frank, the number of exchanges fell to less than half of the five-year average between July 1 and July 7 – immediately after the stamp duty exemption was reduced on June 30.
In the previous week, trading had been 204% above that average as buyers made a last-minute effort to make purchases on the line.
Realtors have revealed numbers for the week after the stamp duty holiday cut on June 30. Knight Frank Says New Buyer Enrollments Up One-Third From Five-Year Average
While buyers could previously save up to £ 15,000 because tax was not payable on the part of a property purchase under £ 500,000, the maximum saving is now £ 2,500 as the range zero rate was lowered to £ 250,000.
It will continue in this vein until September 30, when the limit will return to its usual level of £ 125,000.
“Pause to breathe” – but few failures
Tom Bill, UK head of residential research at Knight Frank, said the drop represented buyers already in the system having a “break to breathe” and waiting for the overburdened property transfer system to return to a semblance of normality.
Some say these buyers are unlikely to end up pulling out of trades and just slow down because there is no longer an immediate deadline to meet.
Dominic Agace, managing director of estate agent Winkworth, said: “There have been remarkably few failures, reflecting the benefits of extending the first stamp duty deadline, combined with a positive market underlying the stamp duty holiday incentive. “
Jeremy Leaf, North London real estate agent and former residential chairman of RICS, said his business has not suffered a single downfall.
“All of the sales that we have dealt with have taken place, although the buyers could not close until June 30,” he said.
“Some have tried to renegotiate the price down or have agreed to slightly different terms, especially those with more constrained finances.
‘[But] most sales were at the agreed price, as decisions were made based on long term aspirations and changing circumstances, whether working from home or needing more outdoor space.
We’ve noticed that it’s noticeably quieter, with phones and emails not buzzing like they used to be, but some buyers will now have a better chance of getting what they want.
However, Leaf admitted that the frenetic atmosphere that characterized the housing market over the past year has calmed down a bit.
“We’ve noticed it’s noticeably quieter, with phones and emails not buzzing like they used to be, but some buyers now expect them to have a better chance of getting what they want. want.
“It was so hectic before that it was almost impossible in some cases to get what they wanted, especially family homes.”
New buyers launch real estate searches
While buyers who had tried to beat the stamp duty deadline may be clear, or take a step back and temporarily rethink, there are plenty of new ones who are starting their property searches.
The number of potential new buyers signing up between July 1 and July 7 was 31% above the five-year average for the same week, according to Knight Frank, while the number of accepted offers increased by 59% and views increased by 4%.
Real estate agent Winkworth told This is Money that the number of people contacting them to buy a property was up 16% from 2019.
At another Hamptons agent, the number of registered buyers in June rose 8% from June 2020 levels. Buyers who registered at that time were extremely unlikely to benefit from the stamp duty holiday.
In addition, the number of registered investors increased by 24% compared to the same period last year.
According to real estate agent Winkworth, buyers’ approaches were up 16% from 2019 in the week following the first stamp duty holiday deadline.
There are also early signs that more properties are hitting the market.
Winkworth, for example, said he saw activity “decline, as expected” in the week following the stamp duty holiday cut – but that his numbers were still better than the equivalent week in 2019.
He said property appraisals were up 12% from 2019 and new instructions by 15%.
Hamptons also said it has a strong portfolio of homes for sale, registering nearly 7% more new instructions in June 2021 than in June 2020, when the housing market had just reopened after a two-year shutdown. month.
Could the shortage of homes for sale start to ease?
More homes listed would help alleviate the inventory shortage that has also helped push prices up to astronomical levels over the past year.
Most indices agree that the value of a typical property has increased by at least £ 20,000 over the past year, or between 8 and 10%, although the latest Halifax index has noted a monthly drop in June.
“The problem facing the housing market in 2021, and the reason for this strong price growth, is the lack of supply,” Bill said.
This was highlighted in the Royal Institution of Chartered Surveyors’ survey of real estate agents this week, which said the number of homes for sale fell for the third consecutive month in June.
In June, house prices fell for the first time since January, according to Halifax
“There are early signs of a resumption of supply, although this may not fully materialize until after the summer,” Bill said.
Knight Frank said the number of stock market valuations in the first week of July was 3% above the five-year average. In the countryside, where the supply was the most limited due to working from home and moving from cities, the increase was 6%.
Market surveys take place when an owner wishes to value his property for sale and thus serve as an indicator of the offer.
Sellers “in unknown quantity” hold the key to the market
Agents spoke of an “unknown quantity” of sellers who may have been waiting backstage to begin their property search, either because of concerns about holding visits due to the virus or because they wanted to avoid the aforementioned mortgage and transfer delays on their subsequent purchase.
Lucy Pendleton, real estate expert at independent real estate agent James Pendleton, said: “If prices start to fall further, it will be the unknown number that has been sitting around for the past few months, fearing to let viewers enter their homes at cause of the virus, or while waiting for the stamp duty race to end so that it can sell without the burden of long transfer and mortgage delays caused by the huge backlog of sales.
With overseas vacations on the menu for many this summer, Pendleton predicted the real estate market might not experience its usual lull in midsummer.
“A sudden surge of properties on the market would start to stabilize prices, and that is still possible even as we move towards a generally quieter time of year,” she said.
“While the summer generally calms activity when people go on vacation, this year there are fewer distractions as people resign themselves to another year of vacation.”
Bill said these “unknown quantity” sellers coming into the market would force them to see that there were still plenty of potential buyers for their homes, despite the stamp duty holiday.
“Recognizing the strength of demand despite the end of the stamp duty holiday can persuade more potential sellers to list their property, thereby restoring more balance to the market,” he said.
“If that happened, it would break the vicious cycle of low supply that has affected some UK sites more than others.
“This means, for example, that some sellers looking to move from London to the countryside have had to put their move on hold due to a lack of buying options.”
However, there is another deadline ahead that could potentially affect house prices as well, in the form of the end of the holiday regime on September 30 – which could cause layoffs to spike.
The contribution that employers must pay for staff leave income has already increased on June 30.
And if coronavirus infections were to increase and, for example, hotel businesses were forced to shut down again, it could also impact people’s economic prospects and the likelihood of them selling their homes or buying a new one.
Sarah Coles, analyst at Hargreaves Lansdown, said: “New variants or an increase in hospitalizations that force a return to lockdowns and business closures, could hamper the recovery and lead to job losses, which would also affect property.
“The real estate market is thriving in a golden loop economy, and there is no guarantee of that as we move forward through the year.”
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