The government has been called upon by one of the industry’s most respected bodies to announce a stamp duty holiday to help the market get back on its feet.
The Royal Institution of Chartered Surveyors - normally one of the more conservative trade organisations - makes the call today as a result of the massive effect of the Coronavirus pandemic on the market revealed by its latest snapshot.
“RICS is not an organisation that would call for a stamp duty holiday on a whim, and indeed our view prior to Covid 19 was that it required a full-scale review. As we start to emerge from this crisis, however, it is likely that the finances of potential homebuyers will be under strain, and the burden of stamp duty could put buyers off” says Hew Edgar, RICS head of government relations.
“For those who can afford to move they may lack confidence in the market, adding to the slow down. A stamp duty holiday could be one of the ways to reactivate the housing market quickly as a short term measure” he continues.
“While the UK’s health is the priority, our survey feedback suggests that the government will need to start considering medium and long-term measures that could assist a post-pandemic housing market. These are exceptional circumstances and the Government will need to consider all avenues that could feasibly rebuild confidence, bridging the gap between uncertainty and recovery.”
RICS is warning that on the basis of its figures, the housing market is not only in trouble now but will probably be in substantial difficulties for the rest of the year - even if the outbreak is successfully quelled in the short term.
In March, after three successive months of increasing buyer enquiries, a net balance of minus-74 per cent of surveyors reported a fall in buyer demand – a sharp fall from plus-17 per cent previously.
Unsurprisingly, March also saw newly agreed sales drop across all parts of the UK with 69 per cent more respondents reporting a fall – down from 19 per cent reporting a rise in February.
Looking ahead, sales expectations for the next three months have also turned deeply negative following the lockdown measures, with a net balance of minus-92 per cent of respondents representing the lowest reading since sales expectations were first recorded in the RICS Residential Market Survey.
Looking forward to the next 12 months, respondents were slightly less negative, although 42 per cent expected sales to fall further rather than rise.
New homes coming onto the market dropped sharply over the past month, with a net balance of minus-72% per cent of UK respondents reporting a fall. As a result of this, the average amount of properties on estate agent’s books are at a record low of 40 properties per branch.
Moving to house prices, a net balance of plus-11 per cent participants reported growth in March, ahead of the Coronavirus crippling the market.
Northern Ireland, Scotland and the South West all recorded the strongest growth in prices.
“The fact that responses are negative not just at the three but also the 12 month time horizon is significant in suggesting that the legacy of Covid-19 could be such that any return to what might be described as ‘normality’ in the economy will take time and households will remain cautious for a while” explains Simon Rubinsohn, RICS chief economist.
“Of course, the primary focus of government is at this stage the health of the nation and defeating Coronavirus and it may be a little premature to be planning for the economic recovery” he continues.
“However, the feedback from the survey does imply that further government interventions both in the wider economy and more specifically in the housing market may be necessary to aid this process supporting businesses and people back into work.”