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The housing markets heading towards a cliff edge when the stamp duty holiday comes to an end


The housing markets heading towards a cliff edge when the stamp duty holiday comes to an end

Sales in some areas are likely to plunge when the tax cut ends in April and buyers find themselves having to stump up thousands extra


Housing markets in some parts of the country will face a cliff edge in April as local logjams mean eight times more people will miss out on stamp duty savings in some regions than in others.

More than 320,000 buyers are expected to miss out on the tax saving, which ends on March 31, according to TwentyCi, a property consultancy. However, they will be concentrated in areas with the largest local bottlenecks in the buying process, with delays to conveyancing, surveying and local authority searches.

The firm’s Stuart Ducker said: “There are just a lot more transactions being processed in some parts of the country than in others. Areas where 40,000 or 50,000 people could miss out will face a cliff edge in April when buyers realise they can no longer afford the property they want.”

As a result, deals will break down. His company expects the fall-through rate of property transactions to more than double from 23pc currently to about 53pc around April, although this number could be higher in areas where more people miss out on the stamp duty holiday.

The steepest cliff edge will be in the South East, where about 49,000 people who agree a sale between September 2020 and January 2021 will complete after the March 31 cut-off, TwentyCi has forecast. Mr Ducker added that, while not all buyers who missed out on tax savings would pull out, those who did would cause problems for everyone caught in their chain.

The firm based its calculations on how long it typically took for a transaction to complete and how many more property sales were currently being processed than usual.

The next biggest backlogs are in the North West and South West. Around 38,000 and 35,000 people in the respective regions who agree to a sale between September and January are not expected to complete in time for the stamp duty holiday.

The area with the smallest logjam is Northern Ireland, where just 6,122 buyers are predicted to miss out, eight times fewer than in the South East. London is also at the lower end of the scale as demand in the capital has dropped off since lockdown.

South East

The South East is particularly vulnerable because it is here that people can make some of the biggest savings, so losing out on the tax cut may lead to more fall-throughs. There are 79 local authority areas across the country where the tax cut equates to more than 2pc of the average ­property price, according to Hamptons International, the estate agency. Of these, 37 are in the South East – more than any other region.

In Spelthorne and Surrey Heath, for example, two local authority areas to the south of Heathrow Airport, the average buyer will save £9,210 and £9,750 respectively on their stamp duty if they complete before April. That is 2.5pc of the average property price in each place.

Other areas in the South East where the saving is equivalent to 2.3pc or more of the average property price are Epsom, Wokingham and Reigate.

Kate Faulkner of the Home Buying & Selling Group, a campaign body, said the March cut-off would be particularly risky in those places where the stamp duty made up the largest percentage of the property’s value.

“It’s here that missing out will have the biggest impact proportionally. Even if the vendor offers to reduce the price that won’t help because it’s more of a cash flow issue,” she added. The group is calling for the holiday to be extended.

Jackson-Stops, the estate agent, said places such as Reigate and Dorking in Surrey had recorded some of the biggest increases in the number of offers made on properties since July.

Alan King from the company said: “Although people are saving a lot of money on their tax bill here, they’re probably having to pay more for the same house than they would have done last year because there is so much demand to live in rural areas now.”

He added that if it came to April and buyers believed they were paying too much, they would not go through with the deal. “I don’t imagine sales will drop off, though. The desire to live somewhere greener isn’t going to go away overnight.”

North West

Markets where large numbers of people will miss out are also at risk because of the cost of collapsed sales to the local economy. TwentyCi calculated that the fallen-through sales would leave a £4bn hole across the country, including the effect on services such as renovations and removals.

“That equates to almost £500m in the North West, where the economy has already been hard hit as it entered a second lockdown earlier than other parts of the country,” Mr Ducker said.

“It could struggle to sustain another blow. This will then have an impact on jobs and incomes and eventually feed back into local house prices.”

The North West has enjoyed the biggest boost in property prices of all regions since the stamp duty ­holiday was announced. Between July and October asking prices rose by 3.4pc, according to ­Rightmove, the property website. Prices have risen in every region apart from London since the tax cut was introduced.

Ian Barber of Yopa, the estate agent, said many buyers in Manchester had decided to move simply because of the stamp duty holiday. “With money being tight, the savings can make a huge ­difference. But the busy market means lots could miss out,” he said.

Clive Rubenstein of Clive Anthony, another estate agency, described the current property market delays as “horrendous”. “The time from agreeing to a sale to completing has gone from eight weeks to 16,” he said. “We’re now noticing a definite slowdown in the number of inquiries we’re getting.”

Blockages in the property market are down to a flood of pent-up demand that was released this summer as well as delays as conveyancers and surveyors adjust to new coronavirus rules and lenders try to cope with requests for mortgage holidays. As England enters a second lockdown, these delays may worsen.

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