Rocketing prices and an extreme supply crunch mean that, for most buyers, the property market is an unpleasant place to be.
For Jennifer Brown*, a 79-year-old pensioner, the situation is stark. Mrs Brown wanted to downsize from the four-bedroom house she has lived in for 22 years in a village in Suffolk. When the stamp duty holiday was extended in March, she decided to make the jump.
She benefited from the buying frenzy: after previously failing to sell the property for £350,000 a few years ago, she got an offer four days after listing it in March, for £390,000. She sold up and moved out.
But now she has been caught out by the supply shortages and soaring prices, which are particularly hitting the type of property she wants. “I sold a four-bedroom house and it isn’t even going to meet the cost of an ordinary bungalow,” said Mrs Brown. In April, she had a £435,000 offer accepted on a three-bed home, but the owners are also downsizers and will not sell until they have somewhere to move to. Five months on, Mrs Brown is still in limbo. “I am beginning to panic.”
But there are signs the market could turn. The stamp duty savings will disappear at the end of this month, and so will the furlough scheme. Buyer demand is high, but has declined rapidly since its peak. Will there be an autumn property market reckoning?…….
Demand is cooling
Lucian Cook, of Savills estate agents, said: “I think the next 18 months will be a period of normalisation; some of the urgency has come out of the market”
Since the spring, when the possibility of getting the maximum stamp duty savings had gone, demand has cooled fast. Savills analysis of data from analytics firm TwentyCi showed that agreed sales in August were 9pc above the 2017 to 2019 average. This was a drop of 44 percentage points since April, and the lowest level since June 2020.
Transaction levels in September could be 10pc to 20pc above normal levels, said Neal Hudson, of BuiltPlace, an analyst. Buyers are rushing to take advantage of the last of the stamp duty holiday savings before September 30; from October 1, the incentive will end altogether.
After the stamp duty nil-rate band was tapered from £500,000 to £250,000 at the start of July, the benefits shifted from the south of England to the North and Midlands, where lower home values meant buyers benefited from a higher saving in proportion to house price.
Analysis by Hamptons estate agents showed that in areas such as Worcester, Rugby and York, savings on stamp duty were equivalent to 0.7pc of local house prices. It is these places that could encounter the biggest change when the tax break ends, but agents are bullish.
Martin Robinson, of Hunters estate agents in York, said: “Back in June, everyone was calling me about the deadline and I was terrified that everyone would pull out of their sales if they missed it. This time I’ve not had anyone panicking about stamp duty. They’re so pleased to get a property, they won’t let it go.”
The supply crunch could ease
The stamp duty holiday contributed to the acute lack of supply because it incentivised investors and second home owners. “They are net ‘takers-away’, as they do not sell anything when they buy, and that has contributed to the supply crunch,” said Mr Hudson.
New instructions in August were 17pc lower than normal levels, according to TwentyCi. “That general lack of stock is likely to underpin pricing to the end of the year, irrespective of stamp duty,” added Mr Cook.
Supply could be boosted in a chain reaction from economic circumstances. The closing of the furlough scheme poses a risk, but any spike in unemployment is more likely to hit the rental market than the sale market, said Mr Hudson. “Unless there is a large number of repossessions off the back of it, the direct impact on transactions will be fairly limited.”
Wealthy upsizers are still the driving force of the market. While agreed sales of homes priced £1m and above in August were still 52pc above the 2017-2019 average, sales of homes worth under £200,000 were down 11pc.
Moves at the higher end of the market are closely tied to the race for space after lockdown. “Whether the change will be structural or if it was a one off shift, that is where the great uncertainty lies,” said Mr Hudson.