Stamp Duty reform to boost activity

Stamp Duty reform to boost activity

  • Stamp Duty reform should lift market sentiment and transaction levels
  • But the November data from the RICS shows both buyer enquiries and sales slipping again
  • Meanwhile, the rental outlook is being underpinned by the imbalance between tenant demand and supply

With HM Treasury suggesting that around 98% of would-be purchasers will benefit from the recently announced reform to Stamp Duty (a removal of the previous slab structure in favour of a marginal system), this policy development has the potential to trigger a material shift in market sentiment and functioning. A snap survey the Royal Institution of Chartered Surveyors (RICS) conducted of contributors in the immediate aftermath of the Autumn Statement produced largely predictable conclusions. RICS members across much of the country expect transactions levels to increase as a result of the reform with an average rise in volumes of somewhere between two and five per cent cited most frequently by respondents. In the capital, the feedback is understandably a little more mixed with central London members on balance anticipating a modest decline in activity.

Turning to the November 2014 RICS UK Residential Market Survey, the results show a further easing in national house price inflation, while weaker demand is again reflected in a further slowing in sales figures. Critically, the number of new instructions registered with estate agents at a headline level contracted yet again, albeit only marginally, during November. This has been an ongoing theme for the past year and it remains to be seen whether the change in stamp duty will encourage more property onto the market. Significantly, the average volume of inventories on surveyors’ books remains close to the record low.

Anecdotal evidence from RICS members suggests that a lack of fresh stock has been one of the contributory factors behind the deterioration in buyer interest. However, it is also clear from the comments the RICS have received that uncertainty surrounding the outcome of the forthcoming general election is also providing potential purchasers with a reason to sit on their hands. At a headline level, new buyer enquiries have now declined for five consecutive months. The sharpest fall (compared with the October reading) was again in London although the net balance was actually negative in seven out of twelve areas covered in the survey. Interestingly, the Northern Ireland data is painting a more robust picture with demand continuing to rise and, in broadbrush terms, at a pace consistent with what was seen earlier in the year.

Against this backdrop, it is unsurprising that the pace of national house price growth slowed once more although it is worth highlighting that the net balance reading is still in positive territory (even if it the lowest number since May 2013). London at the present time remains the only area where more members are telling the RICS that prices are slipping rather than increasing; all other parts of the UK are producing numbers consistent with further increases in house prices in the near term.

Meanwhile in the lettings sector, tenant demand held broadly steady in November but landlord instructions declined compared with October when measured on a non-seasonally adjusted basis. This is the eighth successive month that the RICS have recorded a drop in instructions which helps to explain the upward trend in rents; respondents to the survey are anticipating rents rising by around two per cent over the next twelve months. Interestingly, this positive environment is also being reflected in surveyors anticipating that more landlords will look to increase their holdings of property (43%) than scale back portfolios or exit the market (11%).

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