Predicting how the housing market might play out over the next few months is incredibly difficult. There are a significant number of changes and developments which could create some game-changing circumstances.
It would be unfair to suggest these circumstances are ‘unforeseen’ because most market stakeholders, including ourselves, are quite aware of their potential to occur.
Nonetheless, the big question is, to what degree will they change the market?
The increase to stamp duty for second home owners and buy-to-let-investors is a key focus in quarter one this year.
This change will be introduced on the 1st April and will coincide with both Easter – a traditionally busy period for house moves – and the introduction of the Mortgage Credit Directive for lenders and advisers on the 21st March.
These are three sizeable issues individually, but add them together and we have the recipe for some major market shifts.
In the conveyancing sector, a major challenge is buy-to-let landlords wanting to add to their portfolios before the April deadline, in order to avoid paying the extra costs.
Consequently, firms will be under pressure to complete cases before 31st March.
There has already been talk of ‘conveyancing mayhem’ during March precisely because some firms – i.e. non-specialists and high-street family firms – may not have the capacity or resource to move at the required pace.
This could leave many landlords withdrawing from transactions at the last minute and impacting on any full property chains they are part of.
Certainly our own conveyancing partners, My Home Move Conveyancing, expect the buy-to-let market to feel an initial surge, followed by a drop-off in activity.
Doug Crawford, CEO of My Home Move, said at the end of last year that the stamp duty changes would, “turbo-charge the housing market over the next four months as people race to beat the deadline before the changes bite in April”.
He was adamant the new rules would “change the economics for investors in the long-term. Currently the buy-to-let market accounts for 14% of all property transactions annually, and we wouldn’t be surprised to see this figure fall over the second half of 2016, resulting in an overall market slowdown.”
This could present a real challenge for agents – especially those who have benefited from an increase in activity from landlord purchasers over the past few years.
Testimonies from our own agents in the field suggest the market is currently playing out in this way – with very high activity levels in the first few weeks of January.
Dan Pennington, owner of both our Century 21 Liverpool South and Liverpool North offices, agrees: “In our area we have definitely seen an increase in investor activity. They want to complete before April 1st in order to avoid the increase in stamp duty tax so we are seeing clients wanting to move quickly.”
“Interestingly, vendors do not seem as aware of the stamp duty changes, but we are educating them on this and trying to encourage them to sell/accept offers made with this in mind.”
This is a very important point, especially for those agents who have traditionally dealt with larger numbers of landlord purchasers.
If the residential vendor isn’t aware of the time-restrictions placed upon the investor when purchasing now, they may well miss out on a Q1 2016 sale, or they may decline an offer which is not going to be repeated from April onwards.
It’s therefore incredibly important that all vendors are aware the market may not play out in the same way during the rest of 2016, or beyond that, as it has in the first three months of this year.
Dan makes a somewhat surprising point regarding the role of conveyancers in this market situation.
He says: “The conveyancers we talk to, and use, are expecting a rush come March but they do not seem too concerned or overly talkative about the change.” Perhaps they are trying to downplay the pressure that is likely to be placed on them, or they simply believe they can cope.”
“However, there have been a number of concerns issued by buy-to-let lenders already about the role of the conveyancer in this process, and the ability of some firms to get landlords through to completion before that all-important date. The mood music appears to be focused on making sure clients choose those conveyancing firms that can achieve just this.”
This is why we are using a business like My Home Move Conveyancing, and it’s important for our agents to be dealing with a firm that can make this happen for the client.
We would therefore recommend that agents play a full and frank part in the client’s choice of conveyancer.
If the conveyancer lacks the requisite skills, resources and commitment to meeting those deadlines, it could well result in a transaction falling through, not to mention the knock-on detrimental impact that could be brought to bear across the entire chain.
*Rob Clifford is a Director of Century 21 UK and Central Lettings Solutions, both part of Shepherd Direct