The evidence suggests that new buyers are increasingly unlikely to beat the deadline as the average time to complete a purchase is now over four months. Yet still they come, adding weight to the argument that they were going to buy anyway, stamp duty holiday or not.
Housing market activity in the first few weeks of January often sets the tone for the whole year, though the 2021 outlook is somewhat muddied by the challenges of the pandemic and by the 31st March stamp duty holiday deadline.
However, two main things stand out. Firstly, sellers who have come to the market in the period covered by this latest report from Rightmove are continuing to price very competitively, with some perhaps still hoping to find a buyer and complete before the tax-saving cut-off, though the odds are now against them.
Newly marketed property asking prices are down by an average of 0.9% (-£2,887) on the month. Secondly, buyer activity has continued to exceed the same period a year ago, even though 2020 also had a very active start, being buoyed by the post-election ‘Boris bounce’.
That ‘Boris bounce’ came to an abrupt end with the first lockdown in March and the temporary closure of the housing market but was followed by a far stronger resurgence as people reassessed their housing needs and priorities following their experience of lockdown. With another long lockdown upon us, there are early signs that we are surpassing 2020’s new-year surge in activity, with the number of prospective buyers contacting agents between 2nd and 12th January up by 12% and sales agreed numbers up by 9% on the comparable period last year. Visits to Rightmove have continued to increase since the start of January, and are up by 33% on the same period in 2020.
Tim Bannister, Rightmove’s Director of Property Data, comments: “As we enter the new year and a new lockdown, the housing market remains open but is focused on the imminent end of the stamp duty holiday and on the challenges of the pandemic. These major influences on mover behaviour are clouding the 2021 outlook, but Rightmove’s early January market-leading indicators of buyer demand and the number of actual sales being agreed are looking robust, showing that there are many compelling reasons other than the stamp duty savings to make buyers enter the market in 2021.
"Both metrics are up substantially on the same eleven days of January a year ago, which itself was a brisk start to the year due to buyers reacting favourably to the certainty of a majority government. That certainty at the beginning of 2020 was replaced by nearly a year of pandemic uncertainty, though the major difference between the first lockdown and this one is that the housing market is open. Movers’ changed housing priorities due to the lockdown can therefore be more readily satisfied, though obviously estate agents will be carefully following government safety protocols, with more offering online viewings to help buyers to make shortlists and to cut down on the number of physical viewings that are taking place.”
Rightmove's latest analysis shows that it is now taking 126 days from the time an offer is accepted until legal completion, just over four months. This means that new buyers in the market should not be factoring in any stamp duty savings unless they are first-time buyers, who will still be mainly exempt after the March deadline has passed.
Of those already in the sales agreed pipeline, now at 613,000 in the latest count, Rightmove’s analysis projects that around 100,000 will miss out on their stamp duty saving. Seller flexibility to re-negotiate will be key to preventing some sales from falling through for this group.
However, it should also be remembered that the surge in buyer demand after the first lockdown in 2020 was initially driven by movers’ changing housing needs, and thus started a couple of months before the July introduction of the stamp duty holidays. The combination of the two resulted in an amazing recovery in 2020 activity despite the pandemic, with the number of sales agreed up by 10% compared to the whole of 2019.
Bannister concludes: ”While the tax savings were an added incentive, movers’ desire for more inside and outside space seems to be continuing, and this new lockdown could be a spur to act in 2021 for those who can and who did not do so in 2020. However, there are still a huge number of sales agreed in 2020 that are stuck in the processing logjam and awaiting legal completion, with many hoping to beat the impending tax deadline. For those who fail to do so, there may be difficulties if they have factored the tax savings into their budget calculations.
"The challenge of processing so many transactions in less than three months is made even tougher by the new lockdown restrictions, Covid-19 sickness and homeschooling further reducing capacity in conveyancing, legal searches and mortgage lending.”
Matthew Smith, Sales and Lettings Director at Thornley Groves in Manchester, adds: “The Manchester suburbs, places such as Sale and Altrincham, are absolutely flying. People are looking for more outside space, and there’s much more activity at the higher end of the market – i.e. properties being sold at £500,000 and over – compared to 12 or 18 months ago.
"Many people have outgrown their homes, and with more people now working from home, and undertaking home-schooling, it has really focused their attention on getting their properties ready to sell. Many home-movers are financially motivated, so the stamp duty holiday has definitely been a sweetener to kick people into action. Savings of up to £15,000 aren’t to be sniffed at, but I don’t think the high levels of activity we’re currently seeing are exclusively due to the tax holiday. It’s simply given people the impetus to be alert to moving home, which in turn has led to more demand.”
