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Demand unlikely to change

Rory Joseph is director and Sebastian Murphy is head of mortgage finance at JLM Mortgage Services

This time last month there appeared to be a great deal of media wailing and gnashing of teeth at the latest HMRC residential transaction figures for July.

Lo and behold, there was quite a significant drop-off from the June figures. We wonder what could have been the cause of that? Perhaps the end of the full stamp duty holiday and the sheer number of transactions that completed during the month?

Which was mentioned in passing, but still the figures appeared to be deemed evidence that purchase activity had jumped off the cliff-edge and would plummet for the rest of the year and the future.

One month on, and with the recent publication by HMRC of August’s residential transaction figures, you wonder if the mood music might be rather different.

The reason being that 98,000 residential transactions completed in the UK last month, up by over a fifth on the same month last year, and nearly a third up on July.

Those who suggested the stamp duty holiday was the sole cause for the significant amount of activity in the UK housing market, clearly don’t work for agents, advisers, lenders or anyone else associated with the market, because we’ve all known for some time that there are many demand drivers at play and they’ll continue to be there for many months to come.

A figure close to 100,000 for transactions does look more ‘normal’ but all indications are that July will be the low water-mark for activity in 2021 – for obvious reasons – and that actually the rest of the year will continue an upward trend.

Plus, let’s wait until January to see what the entire year looks like – again, we suspect, that we could be looking at very large numbers, especially when reviewed in a more recent historical context.

The one major caveat here, of course, is the availability of stock which is the real drag on activity, not the end of the stamp duty holiday as some would like to suggest.

For what it’s worth, the likelihood is that we will see a further uptick in September for transactions, some of which will be for those seeking to complete so they can secure that partial stamp duty holiday.

They may well cajole their conveyancers to make that deadline, but (in the grand scheme of things) the saving is small, and if this is the sole reason for anyone wanting to get under the 30th September deadline, then it would be mind-bogglingly weird, to say the least.

No, the facts of the matter are that people want to move, and (as mentioned) it will be the availability of the homes they want to move into which is going to determine how many residential transactions we see, not the end of a partial stamp duty holiday.

Indeed, for any number of months now, stamp duty has effectively had nothing to do with people moving, or wanting to move. Instead the prevailing concerns have been all about the so-called ‘race for space’, the opportunity to move to a home which is more suitable for a different work/life balance, the chance to secure mortgage rates which are close to rock bottom, etc.

Plus – news-flash – September has been very busy and, again, this has nothing to do with stamp duty and everything to do with people returning to the office and having a clearer idea of their forward working arrangements; it also has everything to do with people being much clearer about their own jobs and the security it affords them, and it’s also come from many people deciding that, having sat on their hands for the last few years because of Brexit, now might be the time to make the move they have been thinking about.

In that sense, an impending return to stamp duty ‘normality’ in England – it already happened months ago in Scotland and Wales – effectively means very little in terms of people’s intentions for where they currently live and where they might want to live.

What will determine that is supply, which is why it is so important that the government prioritises this. The recent cabinet reshuffle has placed Michael Gove in charge of meeting its 300k target by the mid-2020s – that effectively needs to be a minimum because it’s not as if we’re starting from a strong position in the first place. Years, decades even, of not getting anywhere near those targets have led us here.

However, demand is unlikely to change anytime soon, and even with supply as it is, prices will continue to inch up as a minimum. It means that owning a home retains its allure, not just as a place to live, but also a potential asset to be utilised. For those reasons, and many more, the much-vaunted cliff-edge is likely to stay far in the distance for some time to come.


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