Operational constraints in all areas of the home buying industry caused by the disruption brought about by COVID-19 and the current advice to work at home where possible, have seen average property transaction times lengthen from 12 weeks to 20 weeks.
Propertymark believes urgent action is required and is calling the Welsh Government to:
- Announce an extension of the LTT holiday of at least six months to support consumers who have embarked on transactions, expecting to benefit from the savings.
- Work with the industry to develop a method to help smooth the end of an extended LTT holiday to prevent another cliff edge.
Action needed now
By acting now, the Welsh Government can release the pressure in the system to allow transactions to complete and avoid a disorderly and distressing period for movers and businesses throughout the market.
Any extension or gradual phasing of the LTT would also help mitigate sharp reductions in consumer demand. More widely, a buoyant housing market drives consumer confidence in the wider economy whereas constrictions on lending and falling house prices lead to reduced consumer confidence and a material reduction in economic activity.
Avoiding failed sales
When the UK housing market emerged from the first national lockdown, it was re-energised by pent up demand. This demand was bolstered by the temporary reduction of LTT with a deadline of 31 March 2021. Following the lockdown, property transaction levels accelerated, and overall, 2020 volumes are expected to end the year higher than last year. With a slight pause during the recent two-week circuit-break, the market is slowly regaining its momentum, including an increase in average house prices.
However, as the market builds steam once again, Propertymark is concerned that the home buying and selling industry does not have sufficient capacity to deal with this surge in demand caused by the need for completions to be concentrated into a limited window.
Movers will apply pressure to complete transactions by 31 March 2021 to benefit from the changes to LTT. Failure to complete those transactions could see the breakdown of chains with consumers potentially financially unable to continue with the purchase, as they would have to find funds to pay LTT.
Property Sector Support Package
Propertymark is calling for an extension to the property tax holiday to avoid transactions falling through, price falls, and a sudden loss of momentum in the market:
- Homeownership provides an increased sense of stability and security to people’s lives and the local communities in which they live.
- Since the introduction of the cut to Stamp Duty/Land Transaction Tax/Land and Buildings Transaction Tax, the housing market has excelled
- Moving to a new home has enormous knock-on benefits for the wider economy and a continued holiday on property tax would increase consumer confidence and encourage both upsizing and downsizing.
- Extending the cut to property taxes would continue to support jobs in the sector and the wider economy.