There’s been a lot of talk recently about the housing market slowing down, prices flatlining and even suggestions that we could be heading towards a property crash.
Personally, I think some of that is overdone. Yes, the market is having a difficult time, but I don’t think we’re on the verge of a dramatic collapse.
What concerns me more is the lack of transactions. Properties aren’t changing hands as frequently as they should, investors are becoming more cautious, and developers are finding it increasingly difficult to make new schemes financially viable.
Therefore, I think the Chancellor needs to focus on ways to get people buying and selling again in the upcoming Budget.
GETTING THE MARKET MOVING AGAIN
One thing that’s clear is that demand hasn’t disappeared. People still need to move, whether that’s relocating, downsizing, changing family circumstances or selling investment properties.
The difficulty is getting buyers and sellers to agree on price and actually complete transactions.
Mortgage affordability is a big part of the problem. Inflationary pressures are keeping borrowing costs elevated and when mortgage rates rise, the effect is felt throughout the market.
Buyers have less money to spend, sellers struggle to achieve the prices they want, and transactions take longer or fall through altogether.
And it’s not just buyers and sellers who suffer.
Every property sale generates work for estate agents, conveyancers, surveyors, mortgage brokers, removal companies and tradespeople. When fewer properties change hands, all those businesses lose out.
Housebuilders are affected too, as weaker buyer demand makes it harder to sell completed homes and commit to new developments.
This is something the Government needs to recognise. A slow housing market has a much wider impact on the economy than simply whether property prices are rising or falling.
STAMP DUTY
If the Chancellor wants to encourage more transactions, I’d start by looking at stamp duty.
It’s a significant additional cost when buying a property, discouraging people from moving when they otherwise might.
Whether someone’s upsizing, downsizing or relocating, having to find thousands of pounds in stamp duty on top of everything else can be enough to put them off.
I’d welcome an increase in the stamp duty thresholds or some targeted reductions to make moving more affordable.
I’d also like to see the Government reconsider the additional stamp duty burden on landlords and investors.
From our experience, once you factor in this tax, legal fees, borrowing costs and other expenses, what initially looks like a sensible investment can quickly become financially unviable.
We need landlords and investors to remain active in the market, particularly given the ongoing shortage of rental accommodation.
SUPPORT FOR HOUSEBUILDERS
One idea I’ve seen discussed recently, which I think has merit, is reducing or temporarily removing stamp duty on new-build properties.
I’ve personally spoken to builders and developers who have told me it’s becoming almost impossible to make certain developments financially viable. Between rising labour and material costs, planning delays and the sheer amount of red tape involved, the numbers simply don’t stack up anymore.
Some have told me that projects which would previously have been profitable are now barely worth pursuing. That’s a real concern when we’re supposed to be encouraging the construction of more homes.
I’m not suggesting we should compromise on safety or building standards, but we have to recognise that developers need to make a profit. If they can’t make the numbers work, they simply won’t build.
Reducing stamp duty on new-build homes could encourage more buyers, help developers sell their properties and give them greater confidence to start new projects.
Of course, we’d need to make sure the savings actually benefit buyers rather than simply being added to asking prices. But I think it’s worth considering. We talk constantly about the shortage of housing in this country, yet we seem to make it increasingly difficult and expensive to build more homes.
ROLL ON OCTOBER 28
I’m not expecting any major giveaways in the Autumn Budget, given the pressure on the public finances. But there are practical things the Government could do to encourage activity without necessarily committing to huge spending programmes.
A temporary stamp duty reduction for new builds, targeted relief for people moving home and a more efficient planning system would all be worth considering.
I’d also welcome sensible support for first-time buyers, although I’d like to see schemes such as Your First Home, extend to existing properties rather than concentrating solely on new builds.
There’s no point helping more people buy homes if we’re not doing anything to increase supply, because that risks simply pushing prices up.
And we can’t ignore inflation. Until inflationary pressures ease and borrowing costs become more predictable, buyers and investors are going to remain cautious.
The Bank of England makes its own decisions on interest rates, but the Government needs to create the economic stability that allows rates to come down sustainably.
THE BIGGER PICTURE
The Government spends far too much time judging the health of the property market by whether house prices have gone up or down.
A healthy market isn’t necessarily one where prices rise every year. It’s one where people can afford to buy, sellers can sell, investors are willing to invest, and developers can make a reasonable return from building homes.
If we can get more properties changing hands and more homes being built, the benefits will be felt right across the economy.
That’s what I’d like the Chancellor to focus on. Not another house price boom, but a property market where people have the confidence and financial ability to get moving again.
