The great property market divide emerging
|Just like after any great party, from what I can remember! there is often a bad hangover! And as the March 31st stamp duty deadline approaches, a division is starting to emerge in the property market, between two distinct camps of buyers and sellers who are viewing the market in two completely different ways!
The first group is likely, or at least hoping to complete by the March 31 stamp duty deadline, and they are partying, or transacting, like it is 1999. Exchanges in January were up 57pc compared to the same month in 2020, which will please beleaguered conveyancers! This according to data from Knight Frank estate agents. Accepted offers jumped 43pc. This group will keep sales price data looking positive for several months. Even at local level those sort of figures have been mirrored here in Cheadle, with us exchanging on double the number of sales from January 2020 and accepted offers were up 30% on the previous year.
The wait and see strategy
The second camp are a lot less positive and quite uneasy at the road ahead. They know they will miss the stamp duty holiday bonanza! unemployment is steadily rising and the country is in its third national lockdown indefinitely. The vaccine rollout means the long-term outlook should improve, but it will take time to get the economy back on track and it could be a painful journey for many. This group now seem to be adopting the “let’s wait and see” strategy.
Viewings in January fell 23pc, according to Knight Frank, while valuation appraisals dropped 41pc. Again at local level, there are some similarities, especially with market appraisals down a whopping 60% on the previous January, yet interestingly viewing levels have remained pretty consistent with the same period last year.
If the supply shrinks they may be disappointed
Of course, this causes another potential issue. If sellers are reluctant to put their properties on the market for the reasons stated previously or because they cannot see suitable alternatives coming for sale, it will keep prices artificially high if demand remands at similar levels. Many buyers we are speaking too are waiting in the hope that there will be a price correction post stamp duty deadline, but if the supply shrinks significantly, they may be disappointed.
Bank of England data shows there were 103,000 mortgage approvals for home purchase in December. This is 46pc higher than December 2019, but a 2pc drop compared to November 2020. Lead indicators show a steeper decline is likely in the pipeline.
The hangover of hesitancy
The Treasury, who are under pressure from all sides, is at pains to continually highlight that it is the time sensitive nature of the tax break, which has triggered such a rush. The flipside is that as soon as the holiday ends, that first group of buyers will be gone.
When they have, the property market could be left with a hangover of hesitancy. Crucially, there will be no buying frenzy to distract from the disgrace of the cladding crisis – which means literally millions of buyers and sellers are shut out of the party altogether – but that’s a story for another blog!
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