Neil Knight, divisional director at Spicerhaart Part Exchange & Group Clients, looks at how the buck has been passed to developers to support buyers and stimulate demand.
As many people expected, Q1 saw a positive performance for property transactions as buyers rushed to beat the change to Stamp Duty thresholds and complete before the 31 March deadline. The new build sector was a key benefactor as it was really the only place where the tight timescales were still achievable.
The worry is though that this short-term gain we have seen is now likely to turn into longer-term pain as relief ends and purchasers face the fact that the cost to buy is now higher. With brokers working overtime already to help clients make the numbers work, the additional Stamp Duty cost could easily be enough to upset affordability calculations that were already delicately balanced.
Given the government’s house-buying agenda and its headline housebuilding target, it’s certainly a frustrating decision – albeit one the government likely felt it had to make in its attempts to balance the books. Not only does it increase the purchase cost – particularly for first-timers – it deters buyers, limits options for lower-income households and removes any incentive for older property owners to downsize.
Hesitancy among buyers risks cooling the market which impacts the entire housing sector – from agents to brokers, builders and developers – and makes that already ambitious housebuilding target that much harder to hit. After all, developers don’t build houses for the sake of it.
With the target of 1.5 million new homes in England, the government has announced a raft of measures – both in the Autumn Budget and the recent Spring Statement. The issue is that the majority of the measures have been supply-side – such as planning reform, new construction training and funding for SME builders. While important and necessary, there is very little thought about how we actually support people to buy these properties which is absolutely critical in reaching this target.
The OBR has since poured water over the government’s claim that it will come in ‘touching distance’ of its target by the end of this parliament. Instead, it believes that planning reforms will deliver 170,000 new homes in England, while the expectation is more likely to be 1 million new homes. It’s almost as if an important part of the puzzle is missing.
In recent weeks, we have seen some positive movement on mortgage rates and a welcome cut to the base rate, as well as the relaxing of criteria by some lenders to help borrowers. Furthermore, in lieu of any government incentives or support, we continue to see many builders and developers extending a hand to buyers to help transactions – whether that’s through deposit boosts or their own equity loan schemes.
While this is all fantastic and demonstrates the willingness of developers to create opportunities to get properties sold, it’s likely that the onus will continue to fall on builders to find ways to help stimulate demand. One option that we are continuing to see more of is part exchange or assisted move propositions, enabling purchasers to either trade in their existing property or get help to move in a cost-effective and efficient way. Our part exchange and group clients have noticed a marked increase in enquiries for these schemes.
It’s a proven way to help those already in the market navigate it successfully, minimising friction and making moves more viable and less painful. Rather than taking on this responsibility in-house – particularly with the marketing and selling of properties – we are seeing developers outsource this role to local or national partners. That way they can utilise their expertise in the market and their estate agency footprint – especially those with branches across the country who can provide a consistent and seamless proposition for both builder and customer.
Anyone that been around the property market long enough knows that Stamp Duty is often a tool governments like to play with. In this instance, it’s a shame that the allure of higher tax receipts wasn’t swayed by the prospect of economic growth from increased transactions. After all, the property market is a key driver for the economy and economic growth. Supporting first-time buyers and facilitating downsizers is absolutely key as their actions keep the property market moving. With the prospect of interest rates improving further and mortgage rates reducing, the extra boost of Stamp Duty relief either staying the same or reducing could have been really powerful.
What is true though is that while government incentives or support may change or be removed, there remains a concerted effort and appetite among mortgage lenders, builders and developers to innovate to provide a broad range of support to help buyers make their dreams a reality. Whether it’s deposit contributions, equity schemes or part-exchange and assisted move, this is certainly the case.
