Now, the challenge is kickstarting the economy back into gear so that the initial losses incurred by the pandemic can be recovered.
There are two aspects to this current transition period we find ourselves in. The first concerns the more immediate and practical measures that need to be undertaken so that businesses can return back to the office and communities can begin physically visiting shops. While this has posed its challenges, high streets are slowly coming back to life.
The second aspect has to do with the economic recovery of the UK. The implementation of lockdown measures on March 23rd brought the majority of sectors to a complete standstill. This was particularly the case with the property market. With prospective buyers being actively discouraged from moving homes, property transactions dropped by 50% in May; and in June, house prices fell for the first time in eight years.
This is not to suggest that demand for property had completely disappeared. In reality, market uncertainty spurred on by the COVID-19 pandemic combined with the lack of available mortgage products from high street banks has been holding buyers back.
The government has realised this, which is why Chancellor Rishi Sunak announced the immediate introduction of a nine-month Stamp Duty Land Tax holiday applicable to all property transactions from the 7th of July. The aim of the tax exemption is to encourage everyone, from first-time homebuyers to seasoned domestic and international real estate investors, back to the market.
A competitive market
The Stamp Duty Land Tax holiday has been well-received, but it cannot be the only measure used to increase transactions. While prospective homebuyers may want to take advantage of the tax relief, one of the key barriers they could face is finding the finance needed to complete a sale.
The UK is renowned for its competitive property market. A survey commissioned by Market Financial Solutions in Q4 2019 revealed that 31% of homeowners in the UK have lost out on a property as a result of being gazumped in the past decade. This can have significant ramifications on the buyer, particularly when we consider the fees and associated costs that cannot be recuperated.
A common reason why homebuyers are gazumped comes down to not having a mortgage in place to commit to a sale. Even with the Stamp Land Tax holiday in place, buyers still do not have access to the same range of mortgage products they had at the beginning of the year. What’s more, banks
have become more stringent, adhering to a rigid application process and taking longer to deploy loans. This is part of the reason why specialist finance has risen in popularity during the COVID-19 lockdown.
As a result of these circumstances, I anticipate that homebuyers and the brokers who represent them will struggle to find a mainstream mortgage product that can be quickly deployed to complete a sale. There is also the possibility that gazumping could increase as a result.
Using specialist finance to unlock the property market
Any attempt to increase national productivity and boost the national economy must include measures to support the real estate market. In this sense, the fact that a Stamp Duty Land Tax holiday has featured as a top government policy is positive news. And if early reports are any indication of what the future months could bring, it is having the desired effect – according to Rightmove, there was a 49% increase in demand for homes between £400,000 and £500,000 in the week following the Chancellor’s announcement.
In order for this momentum to continue, and for online enquiries to convert into actual sales, homebuyers must also be made aware of the full suite of financial products they have available to them. Specialist finance and bridging loans are two such options that could ensure property transactions are completed quickly and confidently, reducing the chances of a property chain collapsing as a result.
