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New buyers arrive in a quieter market after stamp duty holiday ends

The first clues are emerging about what might happen to the housing market after the tapering down of the stamp duty holiday and how the race to beat the deadline pulled sales forward.

After a frantic final leg for agents, mortgage brokers, banks, conveyancers and, of course, buyers and sellers, a leading estate agent has revealed that exchanges dropped to 40 per cent of the five year average in the first week after the cut-off.

According to Knight Frank, the number of exchanges dropped to less than half the five-year average between 1 and 7 July – immediately after the stamp duty relief was cut on 30 June.

In the previous week, exchanges had been 204 per cent above that average, as buyers made a last-minute push to get purchases over the line. 

Estate agents have revealed figures from the week after the stamp duty holiday was cut back on 30 June. Knight Frank says new buyer registrations were a third up on the five-year average

While buyers could previously save up to £15,000 because the tax was not payable on the portion of a property purchase under £500,000, the maximum saving is now £2,500 as the nil-rate band has been dropped to £250,000.

It will continue in this vein until 30 September, when the limit will return to its usual level of £125,000.

‘Pause for breath’ – but few fall-throughs 

Tom Bill, head of UK residential research at Knight Frank, said the drop represented buyers already in the system having a ‘pause for breath’ and waiting for the over-stretched conveyancing system to return to some semblance of normality.

Some say it is unlikely that these buyers will ultimately pull out of transactions, and that they are just slowing down, as there is no longer an immediate deadline to meet. 

Dominic Agace, chief executive of estate agent Winkworth, said: ‘There have been remarkably few fall throughs, 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 estate agent and a former RICS residential chairman, said that his firm had not seen a single fall-through.

‘All the sales we have been dealing with have gone ahead, even if buyers weren’t able to complete before 30 June,’ he said. 

‘Some have tried to renegotiate the price downwards or agreed slightly different terms, particularly those whose finances are more restricted. 

‘[But] most sales have gone ahead at the pre-agreed price, as decisions have been made based on long-term aspirations and changed circumstances, whether that is working from home, or needing more outside space.’

We have noticed that it is definitely quieter, with phones and emails not buzzing like they were – but some buyers will now have a better chance of getting what they want 

However, Leaf admitted that the frenzied atmosphere that characterised the housing market in the past year had died down a little.  

‘We have noticed that it is definitely quieter, with phones and emails not buzzing like they were – but there is an expectation from some buyers that they will now have a better chance of getting what they want. 

‘It was so frenzied before, it was almost impossible in some cases to get what they wanted, particularly family houses.’

New buyers are starting property searches 

While buyers who had been trying to beat the stamp duty deadline might be clear, or taking a temporary step back and rethinking, there are plenty of new ones beginning their property searches.

The number of new prospective buyers registering between 1 and 7 July was 31 per cent above the five-year average for the same week, according to Knight Frank, while the number of offers accepted increased by 59 per cent and viewings rose 4 per cent. 

Estate agent Winkworth told This is Money that the number of people approaching them to buy a property was up 16 per cent on 2019. 

At fellow agent Hamptons, the number of buyers registering in June was up 8 per cent on June 2020 levels. Buyers registering then were extremely unlikely to benefit from the stamp duty holiday. 

In addition, the number of investors registering was up a huge 24 per cent on the same time last year.

Approaches from buyers were up 16 per cent on 2019 in the week after the first stamp duty holiday deadline, according to estate agent Winkworth

Approaches from buyers were up 16 per cent on 2019 in the week after the first stamp duty holiday deadline, according to estate agent Winkworth

There are also early signs that more properties are coming to the market.  

Winkworth, for example, said that it saw activity ‘drop back, as was expected’ in the week following the tapering down of the stamp duty holiday – but that its numbers were still better than in the equivalent week in 2019. 

It said valuations of properties were up 12 per cent on 2019, and new instructions 15 per cent.  

Hamptons also said it had a strong pipeline of homes to sell, recording nearly 7 per cent more new instructions in June 2021 than in June 2020, when the housing market had just re-opened after a two-month shutdown. 

Could the short supply of homes for sale start to ease?  

More homes going up for sale would help to remedy the stock shortage that has also helped to drive up prices to astronomical levels in the last year.

Most indices agree that the typical property has risen in value by at least £20,000 over the past year, or between 8 and 10 per cent – though the latest Halifax index did note a month-on-month drop in June.  

‘The problem facing the housing market in 2021, and the reason for such strong price growth, is a lack of supply,’ said Bill.

This was highlighted in the Royal Institution of Chartered Surveyors’ survey of property agents this week, which said that the number of homes coming up for sale fell for the third consecutive month in June. 

In June, house prices dropped for the first time since January according to Halifax

In June, house prices dropped for the first time since January according to Halifax

‘There are early signs that supply will pick up, although this may only fully materialise after the summer,’ said Bill.

Knight Frank reported that the number of market valuation appraisals in the first week of July was 3 per cent above the five-year average. In the countryside, where supply has been tightest due to people working from home and moving out of cities, the rise was 6 per cent.

Market appraisals take place when an owner wants to value their property for sale and therefore act as an indicator of supply.

‘Unknown quantity’ vendors hold the key to the market 

Agents have spoken of an ‘unknown quantity’ of vendors who may have been waiting in the wings to start their property search, either because of worries about holding viewings due to the virus, or because they wanted to avoid the aforementioned mortgage and conveyancing delays on their onward purchase.

Lucy Pendleton, property expert at independent estate agent James Pendleton, said: ‘If prices do start to continue to cool, it will be down to the unknown quantity who have been sitting tight the last few months, either worried about letting viewers into their home because of the virus, or waiting for the stamp duty race to finish so they can sell up without the burden of long conveyancing and mortgage delays caused by the huge backlog of sales.’

With holidays abroad off the menu for many this summer, Pendleton predicted that the property market might not experience its usual mid-summer lull.

‘A sudden influx of properties on the market would start to stabilise prices, and this is still possible even as we head into what is usually a quieter time of year,’ she said.

‘While the summer usually quietens activity down as people go on holidays, this year there are fewer distractions as people resign themselves to another year of staycations.’

Bill said that these ‘unknown quantity’ vendors coming to the market would require them to see that there were still plenty of potential buyers for their homes, despite the stamp duty holiday.

‘Recognising the strength of demand despite the end of the stamp duty holiday may persuade more prospective sellers to list their property, returning more balance to the market,’ he said.

‘Should this happen, it will break the vicious cycle of low supply that has affected some UK locations more than others. 

‘It has meant, 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 purchase options.’ 

However, there is another upcoming deadline which could also potentially hit property prices, in the shape of the end of the furlough scheme on 30 September – which could cause a spike in redundancies.  

The contribution employers have to pay towards staff’s furlough income already increased on 30 June.

And if coronavirus infections were to rise and, for example, hospitality businesses were forced to close again, that could also have an impact on people’s economic outlook and the likelihood that they would sell their home or buy a new one. 

Sarah Coles, analyst at Hargreaves Lansdown, said: ‘New variants or a rise in hospitalisations that forces a return to lockdowns and closure of businesses, could damage the recovery and force job losses, which would also hit property.

‘The property market flourishes in a goldilocks economy, and there are no guarantees of this as we go further through the year.’

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