In the great swathe of housing market data which is delivered each month, conveyancers’ case volumes often get overlooked, however the latest yearly statistics are not just worthy of examination but, in my opinion, should be cause for real consideration by the government about how its ongoing measures are having a negative impact on the market.
Ever since the extra 3% stamp duty charge was introduced for ‘additional properties’ we’ve talked a lot about the potential damage this could have on purchase activity, but there are also other factors at work in terms of both new home supply coming to market and also how current homeowners feel about their ability to either put their home up for sale, and what they might be able to ‘trade’ their current property for.
Agents will not need me to tell them how supply has been constrained right across the board, plus there appears to be a concerted push in favour of new-build at the expense of ‘second-hand’ homes.
Such properties are not coming to market in the numbers they once used to – existing homeowners are choosing to stay put, carrying out work to their homes, rather than move and pay the growing costs that come with buying a new property.
The impact of this, and many more underlying features of the market, is that conveyancers have experienced their first drop in case volumes for six years – down from 1,077,959 in 2016 to 952,966 last year.
Again, those who work at the coalface of the market will be able to tell you that this comes as no surprise, and has actually been the norm for some time. Add in major uncertainty, as we’ve seen with Brexit, and we perhaps shouldn’t be surprised to see this drop, and (rather worryingly) to conclude that this is likely to be a trend that continues through this year and beyond.
From a firm by firm perspective, the figures - which were compiled by Search Acumen - show that the average firm completed 171 transactions last year, compared to 193 in 2016. Of course those firms who make up the membership of the CA will be doing case numbers far in advance of this but they are not immune from the vagaries of the market.
The top five firms showed a drop in their average monthly volumes of 9%, while across the top 1,000 firms this drop was actually 10%. Again, if this trend continues then we are going to see a significant drop in volumes right across the board.
So, what could be done to ‘help’ the housing market? Let’s be in no doubt that we have a government willing to intervene across many areas although will it see this transaction/case volume drop as a ‘natural’ part of market movement, or might it have the self-knowledge to see that some of the measures it has introduced are now having a real and tangible negative effect?
Clearly, from a tax-take perspective it hasn’t reached that point of change – just last month we had the 2017 stamp duty figures which showed the Treasury was bringing in over £1 billion per month.
Overall, £13 billion made its way into the coffers, up a significant 13% on 2016’s £11.4 billion – therefore if it’s a pure numbers game, at present the government might well think it’s on the right path, and there is no need to row back on what has gone before. Indeed, it’s likely to argue that the extra revenue it has brought it, allows it to introduce more targeted measures, like we saw in last Autumn’s Budget with the decision to cut stamp duty for first-time buyers.
Our view however is that, at some point in the very near future, the government is going to need to look beyond first-time buyers at those further up the ladder who are clearly deciding not to move and the reasons behind this.
Perhaps, too, it will need to reconsider the significantly inflated stamp duty charges for additional properties which might play to the first-time buyer audience but have meant a serious slowdown in buy-to-let purchasing, at a time when the private rental sector actually needs to expand further.
The government can’t just blindly assume that the corporate landlord fraternity are going to take up all the slack, because they won’t. We are reaching a critical phase in terms of landlord purchasing and, in that sense, it would be worthwhile revisiting the extra charges.
It is still very early days in 2018 but speak to many in our industry and you are likely to find a degree of unease about how the market will perform this year.
Even the most positive seem to think that the best we can hope for is parity with last year; many more believe the trend will remain downwards.
Government incentives to first-time buyers will only have a limited impact on transactions and we would therefore urge this administration to have a wider look at the market, the bottlenecks and those pull-points which are stopping people from purchasing.
Action is needed, otherwise that much-heralded stamp duty take will soon start to fall simply because there won’t be enough transactions taking place to support it.
*Eddie Goldsmith is Chairman of the Conveyancing Association (CA)