Peterborough Home Buyers £2,033,577 Windfall as Stamp Duty Holiday Stretched to September…

...and new 5% deposit mortgages for Peterborough first-time buyers

The Chancellor Rishi Sunak announced two initiatives to keep the Peterborough property market firing on all cylinders into 2021.

Firstly, the £500,000 zero-rate Stamp Duty band has been extended to the 30th June 2021. After then it will phase down to £250,000 for an additional three months, returning to the pre-pandemic levels on the 1st October 2021. Secondly, Mr Sunak announced a scheme that will allow Peterborough first-time buyers to buy their Peterborough home with a 5% deposit from this April. Let me look at what each initiative means to the Peterborough property market.

  1. Stamp Duty Holiday extension for Peterborough home buyers

Coming out of the first lockdown in the early summer of 2020, there was a lot of apprehension that the British property market would flounder. Therefore, when the Stamp Duty Holiday was announced back in July 2020 to boost the property market, the deadline was set at the 31st March 2021.  Little did anyone know of the snowball effect of people wanting to move because of the initial lockdown in the spring of 2020, the pent-up demand following the conclusion of the EU negotiations with the subsequent ‘Boris Bounce’ and then the Stamp Duty Holiday which made the perfect storm for what has been the busiest property market in Peterborough since 2001/2.

The average stamp duty paid by a Peterborough homebuyer is £1,719

The reason the Stamp Duty extension is important is that many estate agents and solicitors have been warning for the last couple of months that home buyers would pull out of property deals or renegotiate if they could not complete their sale in time before the Stamp Duty Holiday ended.

So, by phasing down the Stamp Duty Holiday, this will allow some breathing space for burdened solicitors and mortgage lenders, thus decreasing the number of buyers pulling out of their property purchase because they unexpectedly have to find up to an extra £15,000 in Stamp Duty when property sales do not complete on time.

There are currently 1,183 properties that are sold STC in Peterborough alone and the vast majority of those will save money on their stamp duty because of this extension

So, what does the Stamp Duty extension mean for Peterborough house prices?

The extension has heightened confidence in the Peterborough property market. The Government watchdog ‘The Office for Budget Responsibility’, has predicted that house prices in 4 years’ time will be just over 13% higher, compared to their pre-Christmas predicted figure of 11% growth (over the same time frame).

  • 5% deposit mortgages for Peterborough first-time buyers

From next month, Peterborough first-time buyers will be able to buy Peterborough homes worth up to £600,000 with a 5% deposit and a Government-backed mortgage with a fixed rate of up to 5 years.

Rishi Sunak wants to turn the millennial ‘Generation Renters’ into ‘Generation Buyers’ and believes this initiative should be able to help two million people get on the property ladder. When we look at what that would mean for Peterborough, I estimate …

5,207 Peterborough people could be helped onto the Peterborough property ladder with these 5% deposit mortgages

The Government backed scheme will be open to Peterborough first-time buyers for 21 months (until the end of 2022) and available from lenders including NatWest, Lloyds and HSBC (plus others to be announced soon). It will be available on all Peterborough homes new or second hand (previous schemes applied to new homes only).

5% deposit mortgages were all but withdrawn from the market at the start of the pandemic in spring 2020 with an almost default minimum deposit of 10% (even as high as 15% in the autumn just gone) putting homeownership out of reach for all but the wealthiest Peterborough first time buyers.

I must admit I found it a scandal that homeownership among the 25 to 34 year olds plummeted from 69% in 1981 to 36% by 2014, although with certain Government incentives and low interest rates since then, that had risen to 41% by last year, but it’s not enough

With so many young families paying huge sums in rent, who could effortlessly afford to make mortgage repayments on the same property, they haven’t been able to save enough for a 10% initial mortgage deposit, let alone 15%.

Yet now with these new 5% deposit mortgages, many Peterborough first-time buyers will be able to afford to buy their first home in Peterborough. Banks will typically lend between four and a half and five times the gross annual income – this means with a modest 5% deposit; many Peterborough 20 and 30 somethings will now be able to buy their first home. Just before I finish this topic, the 5% deposit mortgages will also be available to current Peterborough homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time Peterborough buyers as well.

How do both of these changes affect Peterborough buy-to-let landlords?

I know many of you Peterborough landlords are adding to your Peterborough rental portfolio because of the Stamp Duty Holiday and with the extension, you too will save some money from it. The issue of first-time buyer mortgages does mean the demand for private rented accommodation in Peterborough might not be as strong in the coming decade.

Don’t get me wrong, tenant demand will continue to outstrip supply of Peterborough rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Peterborough landlords need to take a long hard look at their properties and ascertain if they are fit for purpose both now and into the 2030’s. Tenants are becoming a lot more demanding of what their rental property offers. Wood chip wallpaper, avocado green bathroom suites and kitchens fitted in the 1990’s (or before) simply won’t cut the mustard in the next decade.

The demand from Peterborough tenants for properties with larger gardens, or the ability to keep pets or an extra reception room/garden office to allow them to enjoy their rented home more and also being able to work from home will ensure greater demand for your rental property … and the best bit, they will pay handsomely for that in higher rent.

If you are a Peterborough homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Peterborough and the surrounding area, do not hesitate to contact me personally.

Peterborough Property Market: Is it Time to Stamp Out Stamp Duty?

Most people pay Stamp Duty Tax when they buy a property, house, apartment or other land and buildings over a particular price in the UK. The Chancellor, Rishi Sunak (quickly followed suit by the Welsh and Scottish Governments), announced last July that Stamp Duty was partially being suspended on all English property transactions up to £500,000 (£250,000 in Wales and Scotland) – a Stamp Duty Holiday.

That meant only 1 in 8 English buyers would pay any Stamp Duty Tax on their home purchase (if it was over £500,000), saving any buyer up to £15,000 in tax on the purchase. The problem is the property needs to have been purchased and bought by the 31st March 2021. Complete the transaction a day later, and those buyers will have to pay Stamp Duty.

The issue is local authorities are snowed under with local search requests, mortgage companies and conveyancing staff are working from home, so property transactions are taking much, much longer. This means many Peterborough (and UK) buyers who have currently sold (subject to contract) will miss out on the stamp duty saving.

Most (not all) estate agents have been warning the buyers and sellers in their property chains that some deals might not make the 31st March 2021 deadline and pleasingly, most people aren’t moving because of the Stamp Duty Holiday (they are moving because they need extra space because of the pandemic). However, it only takes one person in the chain not to be ‘singing off the same hymn sheet’ for the whole chain to collapse … so keep in touch with your estate agent.

A campaign by one of the national newspapers and an online petition to extend the stamp duty holiday has meant the topic could be debated in Parliament in the next few weeks, after 100,000 home buyers and sellers signed that petition, asking for an additional six-month Stamp Duty Holiday. The home buyers and sellers are worried the property market will collapse after March 31st when the Stamp Duty Holiday is removed.

The last time British home buyers were conscious of upcoming Stamp Duty changes, it distorted the number of properties sold. The bigger question though is, did it change the overall number of people moving home?

In November 2015, the then Chancellor, George Osborne, announced in his Autumn Statement that buy to let landlords would have to pay an additional 3% in Stamp Duty (over and above owner occupiers) for all property bought after the 1st April 2016. As shown in the graph below, this caused a surge in property buying (which we have seen since this summer with the Stamp Duty Holiday), with many Peterborough buy to let landlords completing their property purchase in March 2016, as they dashed to complete their property purchase before the tax increase.

In the 3 years of 2015/6/7, the average number of Peterborough properties sold (transactions) per month was 281 per month, yet in the month before stamp duty was changed in March 2016, transactions rose to 537, an uplift of 91.3% from the average or an extra 256 transactions in that month alone. Yet, look at the months of April and May, the property transactions numbers slumped, meaning in those two months combined, there were 144 less transactions.

So, if the Stamp Duty Holiday isn’t extended, what will that mean for the UK and Peterborough property market?

London and the South East seem to be particularly exposed to the removal of the Stamp Duty Tax break because it has such a high proportion of property priced between £300,000 and £500,000. These areas benefit from the highest tax savings relative to house price.

Yet, with the average value of a Peterborough home at £215,700, the stamp duty cost if the sale is delayed after the 31st March 2021 is £1,814 – a figure that shouldn’t break the bank

So, if the Stamp Duty Holiday isn’t extended – it might not be such the nightmare scenario as some people believe.

My advice to all buyers and sellers is to be constantly talking to your estate agent, your solicitor and your mortgage broker. With your estate agent to ascertain if they have asked every person (or asked the other agents in the chain to ask the question), “What if we don’t meet the stamp duty deadline?” With your mortgage broker and solicitor to give them all the information they need to ensure there are no delays with any information they request from you.

One final thought, some mortgage providers allow insurance policies to be purchased by your solicitor in case your searches (from the local authority aren’t back in time) … the cost of those will be much lower than the cost of the stamp duty … again, speak with your solicitor. Irrespective of whether you are a client of mine or not, if you would like a chat about anything mentioned in this article, don’t hesitate to contact me.

Peterborough Homebuyers Have Saved £223,660 Thanks to the Stamp Duty Holiday

Yet Many Could Miss Out

Peterborough homebuyers and Peterborough landlords purchasing residential property have saved £223,660 since the Chancellor reduced Stamp Duty on 8th July 2020, yet many more Peterborough homebuyers could miss out.

My analysis of properties sold in Peterborough from the Land Registry between the introduction of the Stamp Duty holiday on 8th July 2020 and 14th August 2020 (which is the most up to date sales data), reveals that many Peterborough homeowners have saved a considerable amount of money in Stamp Duty. According to my research…

since the stamp duty holiday was launched, 78 Peterborough homeowners have saved on average £2,867 each.

That’s a total Peterborough property value of £20,073,240.

Mind you, it’s not all good news as I estimate 172 Peterborough homebuyers risk missing out on the stamp duty savings (worth as much as £15,000 each) due to solicitors/conveyancers and mortgage lenders struggling with demand and failing to hit the 31st March 2021 deadline.

The short-term tax relief, together with the easing of lockdown restrictions, has seen demand for Peterborough property soar this summer as Peterborough property buyers race to move home.

Chancellor Rishi Sunak introduced a stamp duty holiday in the summer, with the stamp duty holiday due to end on 31st March 2021. Yet, I fear the combined pent-up demand caused by…

  1. The post Boris Bounce
  2. People wanting to leave their metropolitan city centres for homes in the countryside
  3. Property with gardens
  4. Property with extra rooms for working from home
  5. The stamp duty savings

…has created a certain amount of constipation and backlog in the Peterborough property market.

I know 31st March 2021 seems an age away, however nothing could be further from the truth. The average Peterborough property sale was taking 19 weeks between the offer price being agreed and the keys/monies handed over BEFORE THE POST-LOCKDOWN. So, with as many as 40% to 50% more Peterborough homeowners in that same sales pipeline of agreeing the offer and the legal and finance to be sorted as we speak, solicitors/conveyancers and mortgage lenders are really struggling with demand for their services, meaning the average time will increase. Hence, I believe as many as…

172 Peterborough people could miss out on the £493,200 stamp duty tax savings.

There is time left to sell and legally complete your Peterborough property sale before the 31st March stamp duty deadline if you put the property on the market now with a realistic asking price, a decent marketing plan and razor sharp reflexes when it comes to the legal and mortgage work.

Yet with 40% to 50% more home movers in the system, those looking to sell their Peterborough home should be very suspicious of agents being too optimistic on their initial asking price (many estate agents get a commission to put a property on the market, meaning they over-egg the pudding on the suggested asking price to flatter you, only to badger you to reduce the asking price weeks later).

Those wasted weeks at an inflated asking price will mean the difference between you securing a buyer and you then buying your next Peterborough home with or without the Stamp Duty savings, which are up to £15,000 per home move.

And whilst many Peterborough buyers seem ready, willing and able to pay top dollar prices for properties that match their changed post-lockdown home needs, speaking privately to many Peterborough agents, some Peterborough homeowners’ price expectations for their homes are now becoming too optimistic, meaning they will undoubtedly lose out.

We also can’t forget as many as 1 in 5 mortgage surveys are being down valued by the surveyor, meaning unless all parties are willing to negotiate, the sale falls through and the homeowner has to go back to ‘Square One’.

My best piece of advice for those currently sold and in the sales systems with lawyers and mortgage brokers is to speak to your solicitor and mortgage broker every single week and ask if there is anything you need to do to ensure the sale proceeds smoothly and expediently. Also, if you are asked for any information from your solicitor or mortgage broker in between times, drop everything and respond quickly to their request. The odd day here and there will make all the difference.

936 Peterborough Properties Sold in Stamp Duty Holiday Bonanza

On the 8th of July 2020, the Chancellor announced the first £500,000 of any property bought was exempt from stamp duty until 31st March 2021. This also included buy to let landlords (although they would still need to pay the additional 3% stamp duty level for second properties). Talking to many of you Peterborough homeowners, I know lots of you are bringing forward your home moving plans to take advantage of this tax cut. Also, many Peterborough portfolio landlords are looking to save paying the tax by bringing their portfolio purchases forward.  Yet how do you ensure you sell and buy your Peterborough property whilst the tax cut applies (a saving of up to £15,000 of stamp duty on your next Peterborough home?).

The biggest issue whenever you are selling your Peterborough property is the properties that you are in competition with. Plenty of Peterborough homeowners have jumped onto the stamp duty holiday bandwagon since the announcement and there are 4% more properties for sale in Peterborough than there were during lockdown. The number of properties for sale in Peterborough can split down into type…

  1. Detached Peterborough homes up 3%
  2. Semi-detached Peterborough homes up 2%
  3. Terraced / town houses Peterborough homes down 5%
  4. Apartments in Peterborough up 7%

So, now you know what you are up against, what do you need to know?

The most important factor is the time issue. It currently takes on average 17 to 19 weeks between a sale price being agreed and the keys being handed over, meaning you need to have found a buyer before the end of November or early December to enable you to complete the sale by the 31st March 2021. That means you really need to have placed your property on the market by the end of September and early/mid-October at the very latest to take advantage of the stamp duty Holiday. Don’t get me wrong though, you could put your Peterborough property on the market after that date, yet the price you will be able to achieve for your property could be affected.

There are 2,276 properties on the market in Peterborough, of which 936 have sales agreed on them

Talking of price, or more specifically the asking price. There is a window of opportunity for Peterborough homeowners to take advantage of this stamp duty tax cut, yet don’t let local estate agents curry favour with you by tempting you with a high initial asking price to win the right to put their for sale board outside your Peterborough home.

A Which report stated in 2017 that many estate agents routinely over inflated the asking prices of the properties they brought to market. One might ask why this is an issue for Peterborough property sellers, as surely, they can just reduce their asking price at a later date? The excellent report proved that those estate agents who on the face of it appear to be doing you some kindness by endeavouring to get more for your home with a suggested higher asking price, the property often ended up selling for much less than similar properties that were realistically priced properties from day one and also, they ultimately took longer to sell.

This Which report compared the original asking price with final selling prices for 370,000 properties to ascertain how many estate agents had reduced the initial asking price of properties in order to sell them. Which found that 70,300 (19%) of all 370,000 properties sold had to be reduced by at least 5% in order to get the property sold, whilst the other 81% (299,700) had no or very minimal reductions to get them sold.

Of the 299,700 sold properties that weren’t reduced or reduced by less than 5%, the average initial asking price was £261,000, yet they eventually sold for an average sale price of £260,000. For those 70,300 homes whose asking prices were reduced by over 5%, whilst the average listing price was £266,000, their eventual sale price was only £241,000, a loss of £20,000 each. Even worse, those properties with the heavy price reductions (5% or more) took an average of nine weeks and one day longer to sell (when compared to the other properties with no or minimal reductions).

What that means is by over inflating your initial asking price of your Peterborough home, it will cost those Peterborough homeowners an extra nine weeks to find a buyer and they will lose out on the final sale price by some considerable margin (meaning you will also probably lose out on the stamp duty holiday).

Assuming your asking price is realistic, you aren’t out of the woods yet. Other things that will help you get the best price for your Peterborough home in the best possible time (and thus save you money with the stamp duty holiday) are …

  1. Everyone searches on the portals for their next home. Photos are therefore very important (a picture speaks a thousand words). If the weather isn’t good on the day of the photoshoot, ask the agent to revisit when the sun is out (and even tell them to hold off marketing the property until those pictures are perfect)… as you only get one go at being ‘new to the market’, with all the excitement and interest that causes.
  1. Employ the services of a solicitor at the same time as instructing the estate agent. Bringing together the legal paperwork of the property you are selling. By doing so, you will save weeks between the sale agreed and completion. Also, solicitors will be really busy, juggling many property transactions at the same time in the next 200+ days. Anything you can do to get a head start on others can only help your cause.
  1. Kerb side appeal. Look at your property from across the road. Does the front door need painting? Could a tonne of gravel spruce up your driveway? Maybe adding some hanging baskets and planted pots will help to make a home stand out for the best reasons?

The final piece of advice I can give you is if you are planning to sell your Peterborough home, make sure your Peterborough estate agent can show you proof of similar Peterborough properties and what they actually sold for to back up their suggested asking price. If the asking price isn’t realistic, the chances are you end up losing many thousands of pounds and wasting everyone’s time. If you would like to chat about selling your Peterborough home, please do not hesitate to pick up the telephone.

Stamp Duty Holiday

Peterborough homeowners and landlords set to save £4,751,890 in stamp duty over the next nine months.

The British are infatuated with owning their own property and politicians know that. Margaret Thatcher used it as a vote winner in 1979 when she allowed council house tenants to buy their own home. Coming to the present day, Boris Johnson’s Conservative government have anxieties that the Brits have not been buying nearly enough homes lately and, as with all countries in the world, the British property market was put ‘on ice’ for several months to help contain the Coronavirus, exacerbating the problem.

The Chancellor, Rishi Sunak, announced on Wednesday plans to boost the property market by momentarily scrapping Stamp Duty Tax (a tax paid by homebuyers) when they buy a property that costs less than £500,000.

Interestingly, Stamp Duty was originally introduced in 1694 as a way to raise funds for The Nine Years’ War (1688–1697) against Louis XIV of France and applied to property and some legal documents.

Why is this important? Well the Government recognise that when the property market is working well, the economy also tends to work well, yet one of the barriers to people moving home is Stamp Duty. Even before Coronavirus, Brits were moving 40.21% less than they were at the start of the millennium, and now with this dreadful situation, the natural reaction is for people to stay put in their own homes, meaning another potential nail in the coffin for the economy.

Stamp Duty has raised not an insignificant £166.53bn since 1998, impressive when you consider the NHS costs £129bn per annum. Looking at more recent figures, the Government currently raise £1.045bn per month from Stamp Duty Tax and this statement will remove a good chunk of that from the Chancellors coffers each month, yet the Government knows a healthy property market will help the wider economy.

As Stamp Duty is a transaction tax, it restricts labour market mobility, making people who are thinking of switching jobs think twice before moving. Stamp Duty also holds back elderly homeowners from downsizing to smaller homes, which is an issue for the UK, as we don’t have enough homes to meet supply and also curtails first time buyers as it forces them to use some of the savings on the tax, as opposed to using for a deposit.

Before the changes, the Stamp Duty thresholds were as follows: 

  • Zero percent up to £125,000
  • Two percent of the next £125,000 (the portion from £125,001 to £250,000)
  • Five percent of the next £675,000 (the portion from £250,001 to £925,000)
  • Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
  • 12% of the remaining amount (the portion above £1.5 million)

and between the 8th July 2020 and 31st March 2021

  • Zero percent up to £500,000
  • Five percent of the next £425,000 (the portion from £500,001 to £925,000)
  • Ten percent of the next £575,000 (the portion from £925,001 to £1.5 million)
  • 12% of the remaining amount (the portion above £1.5 million)

Landlords and Buy to Let Landlords will also benefit from these reduced rates, yet will still have to pay their additional premium for second homes (as they have since April 2016).

To give you an idea how significant this is, if these rules had been in place exactly a year ago for Peterborough properties purchased under £500,000 (i.e. between 8th July 2019 and 31st March 2020).

Stamp Duty would not have been paid on 2,244 Peterborough properties, worth in total £518,103,405

Anyone buying any home in Peterborough over £500,000 are also winners in this, as they will save having to pay the first £15,000 in stamp duty (under the old scheme). This is because during these 9 months, stamp duty is only paid on the difference over £500,000 (so if you buy a property for say £620,000 – one only pays the stamp duty on the difference between £620,000 and £500,000 i.e. £120,000).

I’m all for reducing Stamp Duty, which is imposed progressively at higher rates the higher a property costs (as you can see from the tables above). Yet, short-lived changes to property taxation risk warping the property market and generating a ‘property market hangover’ in Spring 2021. I am part of a group of 2,500 estate and letting agents from the UK, and most of us were running at 150% speed before this announcement, coping with the post Coronavirus explosion in demand.

Now it seems that the ‘feast’ will continue until the end of March 2021 as many more people will move to take advantage of the cut in tax. However, some are suggesting this could lead to ‘famine’ down the line as it will stop people moving into the late spring and summer of 2021.

History tells us different stories on the influence on transaction volumes from changing Stamp Duty rates. In 1991 the Tory’s raised the Stamp Duty threshold at which house buyers started paying and Gordon Brown did so in 2008 when we went into the Credit Crunch. More recently, both George Osborne and Philip Hammond fine-tuned Stamp Duty so that landlords had to pay an additional Stamp Duty Premium after March 2016 whilst first-time buyers pay less Stamp Duty and the purchasers of more expensive homes (over £1.5m) pay more.

The Stamp Duty changes for landlords in 2016 affected the property market only for a short while and by the autumn, transactions levels had returned to normal. However, in 1991, John Major’s Stamp Duty change encouraged home buyers to bring forward home purchases but nevertheless the property market ground to a standstill again once the benefit ended (although the steps up the 1990’s Stamp Duty levels were much harsher as the tax applied to the whole purchase price, not the margin steps as it had in the 1990’s).

So how much money will Peterborough people save when buying a home under £500k?

The average Stamp Duty paid by those Peterborough homebuyers in the 9 months between 8th July 2019 and 31st March 2020 was £2,118

Being objective, I can see why the Chancellor could see this as a suitable way to motivate spending because when people move home, they are more inclined to spend comprehensively on property renovations and the services of solicitors, home removal people, tradesmen and estate agents. So, drastically reducing Stamp Duty will undoubtedly help the UK economy, or at least contain some of the damage from the Coronavirus.  

Also, the experience of being in lockdown will have confirmed to many Peterborough people that they need a bigger home or one with a bigger garden. I also suspect other people may be able to work from home on a more long-lasting basis, meaning there could be a shift from the larger cities to outlying towns and even a move to the countryside.

So, these are my thoughts, what are yours?