Housing Market Update
Stamp Duty Deadline Approaching
On the 8th July 2020, the Chancellor announced the Stamp Duty holiday, putting the afterburners on a market that was already back up and moving fast.
Now as the window is set to close on 31st March it’s a tense time for those stuck in a logjam of transactions where sales are ongoing but have not yet exchanged. Our brilliant sales progressors are working flat out to coordinate chains and expedite areas of delay in the race to beat the deadline. The average time taken for residential transactions is up 30% on last year but so far, fall through rates at Fenn Wright are holding firm at an industry leading average of just 16%. Nationally there have been reports of fall though rates running at 36% or higher.
We have seen demand for property maintained and outpacing supply so even though many are calling for a 6-month extension we don’t see that it’s essential provided the vaccine rollout proves to be the silver bullet we all hope it will be. The Chancellor should however, certainly look at a one or two-month extension to the deadline to be fair to those whose transactions are already advanced and perhaps where contracts have been exchanged by 31st March.
More London Buyers
The number of London buyers registered with Fenn Wright across Essex and Suffolk from June to December 2019 increased by 145% in the same period in 2020.
In the second half of 2020 buyers were facing stiff competition across the board for homes in our region creating upward pressure on prices paid and, in some cases, wiping out the Stamp Duty saving. This surge in demand has been sustained throughout the winter months.
People are still placing greater value on access to outdoor space, a garden and a home office. This shift of emphasis has depressed prices being paid for flats.
The Market in February
Demand, which has been a little subdued by the current lockdown, is still outpacing supply and we are selling at an amazing rate considering the restraints of lockdown. We feel demand will surge again in the spring. New sales that we are negotiating now are unlikely to beat the deadline as the average time to complete a purchase is now over four months so current demand is not driven by the Stamp Duty deadline.
New Homes Market
The opportunity to get on to the Help to Buy scheme has ended for second movers. From April onwards it’s only available for first time buyers and the maximum price comes down from the national £600,000 to a range of regional caps. The east of England is capped at £407,500.
Around 80% of buyers who were using the Help to Buy scheme were first time buyers anyway but that still means that the 20% or so of second steppers won’t now be eligible. Nevertheless, our New Homes team report that the opportunity to buy a brand-new home appears to be as popular as ever in living memory with the buying public.
We are seeing that 90% lending is now very healthy with new lenders coming to the market every week. Self-employed mortgages however, are proving increasingly difficult with LTV restrictions and cautious underwriting – an area which needs addressing. Overall, it’s good news that lenders are re-introducing high loan to value mortgages and also overturning previous bans on gifted deposits because that will contribute to favourable conditions for first time buyers in 2021.
Outlook for 2021
In-house research conducted by Fenn Wright in December shows that 86% of buyers see prices remaining stable or increasing over the next three years. Interestingly, even those who felt prices could fall in 2021 (a higher percentage than we would normally find) were still prepared to enter the market and commit to a purchase. This is really another a sign of long-term confidence in the market.
The glass half empty viewpoint would highlight a risk of rising unemployment following removal of the furlough scheme. Some ongoing Brexit disruption and the ending of the Stamp Duty holiday could also reduce the pool of buyers this year and prices could fall back. However, if your glass is half full, we take the view that the speedy roll out of the vaccine and a return to some degree of normality will surely spark some positive sentiment in the market. Many economists now believe there is going to be a post-Covid boost to household spending.
So, if the vaccine is the silver bullet we all hope it will be and the pandemic is under control by April, we think spring and summer could see the market take off again and we could be talking about a second year of booming sales.