BUYERS are still keen to move but many sellers have reduced their asking prices to ensure deals can conclude before the end of the stamp duty holiday, according to a report released this morning.
Rightmove says average UK asking prices dropped slightly over the last month by 0.5 percent. Although activity levels are still significantly higher than they were this time last year and the number of sales agreed has risen by 50 percent compared with October 2019, there are widespread concerns that buyers who agree a purchase now may not be able to complete their purchase before the end of March and therefore have to pay the full rate of tax on their purchase.
Part of the challenge is that surveyors, mortgage lenders and property lawyers are struggling with the sheer volume of property transactions.
Rightmove now estimates there are 650,000 residential transactions working their way through the conveyancing process at the moment, which is a 67 percent increase on the same time in 2019.
This considerable surge in caseloads has meant that the time it takes to buy a home has lengthened from an average of 12 weeks to 20 weeks. Obviously, given this additional time pressure, the sooner a buyer is found for a property, the higher the likelihood that the sale will conclude in time to benefit from the saving.
Tim Bannister, Rightmove’s Director of Property Data, explained: “Given the ongoing mini-boom, prices might have been expected to rise again this month, but instead we have a slight dip which could be a result of some new sellers pricing more realistically to have a better chance of agreeing a sale in time to benefit from the stamp duty savings on their onward purchase.
“We know from a recent Rightmove study that sellers are twice as likely to sell if they agree a sale based on the first price at which their property goes on the market, something that’s even more important now as we move towards the end of March and the end of the stamp duty holiday.
“If your initial asking price is too high then you’re less likely to get an offer even after you’ve cut your price back to a more realistic level.”
Tim continued: “After some brief hesitation as people waited for the detailed government guidance and legislation, it’s now clear that home-movers are carrying on with their searches and sales during this second lockdown in England with the market staying open.
“This ongoing activity means that the processing log-jam continues to pile up because of the sheer number trying to reach the finish line by the end of March.”
Jeremy Leaf, former RICS Residential Chairman, cautioned: “Many are aware that delays in arranging mortgages, surveyors, searches and conveyancing due to the busier-than-expected post-lockdown uplift has meant meeting that deadline could be touch-and-go even, if agreeing terms in the next few weeks.”
Tomer Aboody, Director of property lender MT Finance, observed: “Some sellers were guilty of unrealistic pricing, believing buyers would pay through the roof but now, with the clock ticking before the stamp duty holiday ends in March, they’ve had to become more realistic and accept lower offers or reduce their pricing.
“Prices and volume levels are astronomically higher than this time last year, when we were facing the general election. Now, with the election long over, Brexit brewing and a possible vaccine for Covid-19, we are hoping for a strong end to the year, before the economic reality of the pandemic really hits.”
Tomer suggested: “It would be surprising if the government didn’t extend stamp duty relief beyond March, so as not to coincide with the extended furlough scheme finishing.
“This would significantly help in propping up the market and needs to be coupled with continued cheap borrowing and the return of higher loan-to-values, to ensure the housing market doesn’t take a huge hit.”
Does this mean that those who are buying now are, potentially, paying over the odds for their home and may find that values decrease over the next few months?
Director of London estate agency Benham and Reeves, Marc von Grundherr doesn’t believe this is the case, and argued: “One swallow doth not a summer make and in the same way, one month’s reduction in asking prices doth not mean a housing market downturn.
“Far from it in fact when you look at the data from the past three to four months and understand the huge rise in asking prices since the advent of the stamp duty holiday.”
Of course, the big question that no one can answer as yet is what will happen to property values once the holiday is over.
With the incentive to purchase removed, it’s quite possible that we could see the steam come out of the housing market from April 2021.
But to what level prices may correct next year, if indeed they do, is anyone’s guess.
Thanks for reading,
Source: Louisa Fletcher – express.co.uk