I have been saying for a while that with the pandemic forcing us to stay home and restricting our ability to go out and spend our money, whether in the pub or out shopping, many are going to end up with a decent amount of savings in the kitty. That seems to be reflected in the housing market as according to an article in The Telegraph this month, a quarter of homes are selling within a week of coming to market. And in fact, asking prices are up 2.1% between March and April.
Naturally, a lot of people are also keen to get in before the stamp duty holiday reverts. As many of you will know Chancellor Rishi Sunak has extended the stamp duty holiday until the end of June 2021 and ruled that it will then be tapered until the end of September. The extended holiday means that no tax will be levied on the first £500,000 of properties in England and Northern Ireland until June 30th. After which, up until September 30, tapering will mean no stamp duty will be charged on residential property bought for up to £250,000. This holiday has been credited as a significant contributor to the rise in house prices seen during 2020 and continuing this year. Figures for the Office for National Statistics show that prices increased by 7.6% annually in England in 2020, to an average of £267,000 – the highest growth rate since June 2016.
The stamp duty holiday also applies to Buy-To-Let investors and those buying a second home. Although they do still need to pay the surcharge that applies to second homes, which amounts to an extra 3% on each stamp duty band (4% in Wales & Scotland). So instead of paying 0% on the first £500,000, they only pay 3% (or 4%), which is still a significant saving.
After September 2021, or for ease, from October 1, 2021 stamp duty in England and Northern Ireland is set to return to previous levels:
> £125,000 – no stamp duty tax applied
£125,001 > £250,000 – 2%
£250,001 > £925,000 – 5%
£925,001 >£1.5m – 10%
> £1.5 million – 12%
Where the purchase is for an additional property, e.g. a BTL or second home, the rates will also revert on the 1st October:
> £125,000 – 3%
£125,001 > £250,000 – 5% (2% + 3%)
£250,001 > £925,000 – 8% (5% + 3%)
£925,001 > £1.5m – 13% (10% + 3%)
> £1.5m – 15% (12% + 3%)
The savings available when purchasing plus the offering of 95% mortgages to first time buyers, along with the extra cash saved from not going out, help to explain the rush to buy. RightMove’s latest house price index suggests that house prices have hit an all time high, with an average asking price of £327,797, an increase of £60,797 or 22% vs last year’s sold house price statistics from the ONS (not like for like but a a very interesting comparable). With that said, buyer demand is still outstripping supply, even with 145,000 properties being marketing this month. Agreed sales are also up by over 55 percent versus the same period 2 years ago. Reducing the overall inventory to the lowest proportion ever recorded.
My colleague recently bought a new house, having had to spend 7 months in serviced accommodation while looking for a property. He’s lamented that every time they found something nice it was either ripped from under them or the vendors were unwilling to negotiate on pricing. We’ve even had clients at auction where target sales prices have been surpassed by 50%, begging the belief of how the property will even be profitable after completion of the works to be done.
It doesn’t seem like this is all a bubble either, with the vaccine rolling out swiftly, experts believe the market will continue to be buoyed by the optimism. Apparently prospective buyers spent over two billion minutes in one month on RightMove. The first time they’ve ever seen figures of this magnitude.
So if you are looking to buy now, ‘early bird catches the worm’. But do remember that with the frenzy of sales, the average time taken for properties to complete has also increased by 6% when looking at the year-on-year figures. Increasing from 106 days to 121 days on average. On average, according to The Guild of Property Professionals, the total time taken for a new instruction to go through the entire process and complete has increased from 184 days to 197 days, well over half a year.
From our point of view lenders are doing their best to adapt to the pace of the market as they have been doing throughout the pandemic, and when all is aligned we are still seeing some quick completions with a £960,000.00 bridge completing in 5 days recently. Most importantly from your point of view is to manage the expectations of your vendor, arm your solicitor and broker with every shred of information you can from the start, and work with professionals. Make sure there are no weak links. I’ve said it a thousand times but if you are looking to utilise short term finance and complete a deal quickly, use a specialist solicitor who is used to dealing with this type of transaction as the legal process is far from straightforward and conveyancers are clearly busier than ever right now.
Whatever your current situation, if you are looking to invest in a second property, carry out a development or grow your portfolio, we remain on standby to help with any of your financing requirements.