This article is the first in our Expert Insight series, which will explore various topics, challenges and opportunities related to the property sector, with assistance from industry experts from across Foxtons.
In January 2021 the Telegraph reported that as many as 16,000 buyers were likely to miss out on potential stamp duty savings due to completion delays in the wake of the Covid-19 outbreak. These individuals were looking at the prospect of either having to attain thousands of pounds at short notice to cover taxes they hadn’t bargained for, or stepping away from the purchase of their dream home entirely.
So as to maintain confidence in the housing sector, and to acknowledge the impacts of the additional periods of lockdown in November, December and into 2021, the stamp duty holiday was officially extended until 30 June. A transition period will then be in place until the end of September, during which time the nil band rate will sit at £250,000, double its standard level of £125,000.
The decision to extend meant thousands of buyers were able to benefit from stamp duty savings that had, at one point, looked likely to pass them by.
Speaking about the holiday’s altered end date, Neil McGimpsey, Director at Foxtons New Homes, said: “The extension to the stamp duty holiday was certainly the right decision. People’s purchases have been delayed through no fault of their own, and it wouldn’t have been fair if they had been required to stump up a large sum of money that they hadn’t budgeted for.”
While many buyers will be able to complete deals and move into their properties prior to the extended deadline’s arrival, it is still the case that construction delays exist, and the stamp duty holiday’s extension will still come too early for some. Though the pandemic’s influence on the construction pipeline has become less pronounced, the impacts are still being felt, and likely will be for some time in certain circumstances.
The momentous impact of Covid-19
When the UK’s initial coronavirus lockdown was introduced in March 2020, nearly all businesses were compelled to shut their doors, down tools, and wait with baited breath for the Government’s guidance.
As with every other sector, real estate was severely impacted. Many development sites came to an immediate standstill, while others were duty-bound to operate at a much reduced pace so as to comply with social distancing measures.
According to statistics released by Homes England, the beginning of 2020 saw starts of private sale residential properties for open market sale decrease by 56% when compared to the previous year. This represents the lowest level of starts since the first six months of 2012-13, something Homes England has directly attributed to a ‘slow-down in housebuilding activity caused by the Covid-19 pandemic’.
Across 2020, imports of construction materials decreased by 12.8% when compared to 2019, while exports decreased by 10.8%. One of the key results of this, combined with various other Covid-related effects, is that all construction work fell by 12.5% in 2020 compared with 2019. This was the largest decline in annual growth since 2009, where output fell 13.2%.
In real terms, this led to the delayed completion of nearly 240,000 new homes across England, and even when construction workers found themselves able to return to sites in April and May, the need for social distancing resulted in fewer employees being able to congregate on sites, which hampered completion times even further.
Reduced capacity on site, as well as other sites being mothballed, increased the average build-out time by three to eight months, leading to significant delays in both completions and new starts on site. On top of that, reported shortages of plasterboard, bricks and mortar, as well as an abundance of logistical challenges, saw supply bottlenecks become commonplace. This meant that, although some sites were able to re-open relatively quickly, most faced significant delays.
According to Experian’s Winter 2020/21 forecasts report, ‘all construction sectors are estimated to have seen a decline in output in 2020’, something which owes much to difficulties associated with putting Covid-19 protocols in place, and issues around securing materials and getting employees on-site.
Experian’s report also states that, while estimates suggest construction output fell by 16.6% in 2020 – with housing, private industrial and private commercial sub-sectors falling by between 21% and 23% – there is likely to be a marked improvement over the coming 24 months, with overall construction output expected to grow by around 11.5% in 2021, and a further 7.6% in 2022.
The return of business as usual?
“Things are starting to get back on track across the property sector, but delays can still be seen, and it is inevitable that some sales will not go through by the end of June,” admits Neil. “This could result in buyers having to shell out an additional £12,500 to secure their property, which is a significant sum of money for anyone.
“I have spoken to a lot of buyers recently, most of whom are entirely realistic about their chances of being able to make use of the stamp duty holiday. They see the potential savings as a bonus rather than a deal-breaker should they miss the June 30th deadline. This has resulted in a much more robust under offer pipeline than the one in place as the industry approached the original 31 March deadline.
“The stamp duty holiday is a fantastic opportunity for buyers to save a lot of money and there is still time to take advantage, especially if looking to buy a new build. When it comes to new builds the conveyancing process tends to be far simpler and quicker, and there is no chain, so in many instances the process can be completed in 6-8 weeks with the support of a good solicitor and mortgage broker.
“Foxtons is currently working very closely with solicitors, brokers, developers and buyers to make sure everyone has the best chance of getting sales finalised in good time. There is a lot of pressure on those in the property sector to get these deals done, and everyone is absolutely working at peak capacity, but there’s a very clear focus and everyone is facing in the same direction.
“Of course, it is understandable that some individuals will have concerns or questions with regard to the looming deadline, and I would urge these people to get in contact with Foxtons to see what can be done. No query is too small. This is a time to be proactive, so reach out, make enquiries, and get the assistance you need.”
If you would like to get in touch with Foxtons’ New Homes team email firstname.lastname@example.org or visit the dedicated page on our website.
To see the new build properties currently listed by Foxtons, click here.