End of Stamp Duty Holiday Means Buyers Need a Plan B
The upcoming end of the stamp duty holiday in its current format could lead to a significant increase in the number of chains collapsing and means agencies, now more than ever, need to have contingency plans in place.
That is the warning from chain repair experts HBB Solutions, which says agents need to have a clear plan B if things start to go wrong.
The stamp duty has undoubtedly boosted and sustained the market since it was introduced back in July 2020, but the first stage of its phased-out approach is set to be reached at the end of this month (June 30).
At present, any home worth up to £500,000 is eligible for the stamp duty holiday, but after June 30 the nil rate threshold will drop to homes worth up to £250,000 until September 30. From October onwards, the nil rate threshold will return to its pre-stamp duty holiday level of £125,000.
HBB Solutions has been in touch with some of the high street’s major lenders on their cut-off dates for receiving a Certificate of Title (COT) in order to complete on a mortgage by month end.
HSBC/First Direct 21 June 2021
Leeds Building Society 23 June 2021
Halifax 23 June 2021
Barclays Bank 23 June 2021
Precise Mortgages 25 June 2021
Meanwhile, Nationwide/The Mortgage Works has provided no deadline, but have said they will need five working days to send the funds by BACS and if the notice is less, they will deduct £20 for the CHAPS payment.
This effectively means anyone relying on mortgage funding has about a week left for their solicitor to complete their work, so the lenders can get the COT next week and release funds in time to beat the deadline.
This, in turn, means there could be many buyers and sellers, relying on the significant stamp duty savings they could make, pulling out late on and leading to the unfortunate but all too common situation of a chain collapsing like a pack of cards.
However, there are ways agents can prevent long chains and fall-throughs from disrupting their business, HBB Solutions insists.
Chris Hodgkinson, managing director of HBB Solutions and a former agent himself, said: “We all know how frustrating it can be when chains collapse. We’ve been fixing them for nearly 11 years now. We typically buy with a discount or alternatively charge a fee, starting from as little as 8%, for our service. But that cost doesn’t have to be absorbed by just the one seller, it can be negotiated across the entire chain to make if affordable and keep the sale of every house together. Even if a sale falls through only days away from completion, we’re here to help and get it back on track.”
Fall-throughs and chains breaking down – how big a problem is it?
Data earlier this year estimated that one in four sales fall through before completion, costing homebuyers an average of £2,700 each time.
Research from property platform WiggyWam found that, in total, property transactions that fall through are costing UK homebuyers a massive £607m every year.
And there are fears that this number will inevitably rise further as the stamp duty holiday gradually comes to an end in two blocks.
On average, nearly a quarter of am (225,000) fall-throughs occur each year in the property market, costing buyers, sellers and agents alike.
There are a number of different reasons for property sales being cancelled before completion, which typically include mortgage issues, gazumping and gazundering, conveyancing delays, problems revealed in the survey, and broken chains.
Sales that are part of a chain – which is most sales – are especially vulnerable to fall-throughs, as it only takes problems with one part of the chain to cause major issues for everyone else. In particularly long and complex chains – it is not unheard of for four or five sets of buyers and sellers to exist in a chain – the chances of fall-throughs and complications are naturally much greater.
It seems highly likely, given the extraordinary levels of demand at play in the property market right now, that the one-in-four statistic – which others elsewhere have previously suggested is as high as one-in-three sales collapsing – will increase by the end of the year.
“I think we all know the pressure lenders, solicitors, search providers and, in particular, agency sales progression teams will be under in June,” Hodgkinson continues.
“We’re standing by and have our lawyers, resource and, quite importantly, cash funds all in place. We can give you a purchase price within just a few hours and provide a same day completion if it is required. If you have a chain That is not on track, then talk to us, we’re here to help.”
HBB Solutions believes that, even once the two-stage stamp duty holiday has ended, there could be issues with buyers walking away from a sale because they will no longer benefit from the stamp duty saving. In turn, sellers may be less likely to list – or withdraw their home from the market – if they start to panic about demand falling off a cliff.
What is the solution?
As the old saying goes, failing to prepare is preparing to fail, and HBB Solutions believes that agents need to partner with a firm that can offer alternative solutions to be ahead of the game if the worst comes to the worst in terms of more chains collapsing.
One estate agent partner HBB Solutions is already working with has championed the merits of having a chain repair plan B at its fingertips.
Simon Bradbury, managing director of Thomas Morris, comments: “We find the service and proposition that HBB provide is excellent! In the highly competitive market in which we currently operate, it is increasingly challenging to come up with a genuine and compelling USP to entice prospective sellers.”
He adds: “The HBB proposition is a great ‘insurance policy’ when a chain collapses or a seller needs a guaranteed sale.”
Meanwhile, Relocation Agent Network (RAN) – a national network of estate agents specialising in relocation – has been recommending the services of HBB to its membership for more than two years now.
Mark Westcott, director at RAN, said: “We were impressed by the proposition and the team behind HBB and they were by the quality of the estate agents that make up RAN. The introduction of HBB to the membership has led to many successful deals completed as a result. Our members are now able to market HBB’s services to potential vendors as another option if needed, giving them a competitive edge, as well as promoting a part exchange offering to local developers for any sites they have that don’t have access to that service.”
The remainder of this month is likely to be incredibly busy for agents, conveyancers, surveyors and removal firms, Hodgkinson adds, and then again in the lead-up to the end of September.
Given the pressure on the system, it seems almost certain that there will be a rise in the number of chains collapsing and the number of transactions falling through, and it will be those agents who have an adequate plan B in place who will be best set to cope.