A shocking one in three (34%) property transactions fell through in the last 12 months, according to research from Smoove’s inaugural Home Movers Report. This caused a waste of almost £2,000 on associated costs, such as surveys, local authority searches and legal fees.
The volume of busted transactions contrasts with booming market activity. According to the report, home buying activity has risen significantly, as new instructions (the process of buying a home) are up by more than a third (36%) year-on-year. Broken down by first-time buyer activity, the number has risen even higher, by 54% year-on-year.
This corresponds with previous research reported by Today’s Conveyancer which showed that the number of deals falling through pre-completion is on the rise.
Creeping costs and rising uncertainty
This surge in demand has caused a supply crunch, which has impacted house prices and mortgages. According to Smoove’s data, the average re-mortgage value is £390,647, up from £352,900 the previous year.
Rising house prices and living costs have had both a direct and indirect knock-on effects for property transactions. With solicitors in high demand and facing capacity constraints, the year-on-year average legal fee has risen by 11% or £140, from £1,273 to £1,413.
Homebuyer surveys cost £525 on average, up from £465 the previous year. Potential homeowners are therefore paying almost £2,000 in associated costs – money which could be wasted if the transaction then falls through. Average UK stamp duty costs have also risen from £5,302 to £5,502 year-on-year.
The length of time to buy is also creeping up. Within the last six months, the average time to complete was 153 days, the equivalent of more than five months. Compared to 2019, before the pandemic, this number was 124 days – an increase of 23%.
The increase is most likely a result of the post-lockdown boom, as changing consumer lifestyles and demand outweighed supply, combined with greater capacity constraints for solicitors, and local authority searches taking longer to complete likely due to a backlog.
Moving home: a stressful deterrent
Nine in ten homebuyers found the process of moving home stressful (90%). The length of time it took to complete (40%), the lack of certainty (34%) and waiting for exchange and completion dates to be finalised (33%) are some of the main reasons.
Some of the biggest costs homeowners found when moving are legal fees (46%), buying new furniture (44%) and mortgage product fees (32%), not including stamp duty, deposit and estate agency fees. On unforeseen additional costs, homeowners spent on average £1,640.
Following the experience, one in two homeowners (55%) would be unlikely to move again within the next five years, signalling the whole process puts homebuyers off from moving, potentially staying in homes that may be unsuitable in later life as those unlikely to move again was highest among over 55-year-olds.
When asked what they would do differently next time moving home, more than two-fifths (45%) would save more money and almost a fifth (19%) would choose a different soliciting firm or estate agent (19%).
Commenting on the report’s findings, Jesper With-Fogstrup, CEO, Smoove said:
“Home moving can often be an agonising, horribly stressful experience. The fact that few would argue with this speaks to a failed system.
One in three home buying transactions should not be falling through. This figure represents tens of thousands of broken dreams and huge sums of money essentially poured down the drain. Creating more certainty around property transactions is essential. It will probably require legislative reform to provide greater protection to buyers and sellers once offers have been accepted.
However, in the meantime, there are many things the industry could do to reduce stress levels and the proportion of transactions falling through. As we’ve seen, the sheer length of time is a major driver of stress and uncertainty. The entire process requires significant digitisation and automation, expediting paperwork and alleviating pain points.
People should be able to engage with the transaction process entirely online or via an app, providing digital IDs, signatures and form filling and see its progression in real time. This could really help modernise the industry and transform the home moving experience.”
