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CORONAVIRUS UPDATE

See the latest Coronavirus statistics from across the world on our world map SEE MAP UK Confirmed cases: 274,762 | UK Deaths: 38,489 SEE MAP Italy Confirmed cases: 232,997 | Italy Deaths: 33,415 | Italy Recovered: 157,507 SEE MAP Spain Confirmed cases: 239,479 | Spain Deaths: 27,127 | Spain Recovered: 150,376 SEE MAP See the latest Coronavirus statistics from across the world on our world map SEE MAP UK Confirmed cases: 274,762 | UK Deaths: 38,489 SEE MAP Italy Confirmed cases: 232,997 | Italy Deaths: 33,415 | Italy Recovered: 157,507 SEE MAP Spain Confirmed cases: 239,479 | Spain Deaths: 27,127 | Spain Recovered: 150,376 SEE MAP

TODAY'S OTHER NEWS

Urgent government stimulus is needed to reignite the housing market - claim

Covid-19 and the subsequent government lockdown will result in a loss of 526,000 home sales in 2020, according to further analysis by Knight Frank.

This fall in transaction volumes represents a reduction of 38% on 2019 and poses significant economic implications.

Based on the assumption that the current lockdown will remain in place through April and May, with a gradual lifting through June, Knight Frank has also forecasted that the knock-on impact of the housing market shut down will also result in 350,000 fewer mortgage approvals in England and Wales this year.

The global property consultancy says this fall in activity will be multiplied across the economy. Knight Frank’s estimate is a loss of £7.9 billion in DIY and renovation spend and £395 million on removals companies.

There will be a wider economic impact, including the loss of employment and general mobility. This drop in economic activity will have a huge impact on The Exchequer, with the loss of £4.4 billion in stamp duty, accompanied by a decline of at least £1.6 billion in VAT and ‘significant declines’ in personal and business tax revenue.

Tom Bill, head of London residential research at Knight Frank, comments: “Moving house has a clear multiplier effect for the economy. Different-sized businesses in all areas of the economy feel these benefits, which is something the government will take into account when drawing up its post-lockdown stimulus plan.”

Additionally, fewer house purchases will lead to a sharp decline in mortgage activity.

Simon Gammon, managing partner, Knight Frank Finance, explains that, as a result of the lockdown, lenders are likely to issue almost 350,000 fewer mortgages for house purchase this year than they otherwise would have done.

That includes more than 150,000 fewer mortgages to first-time buyers, underlining how crucial it is for the whole economy that property industry professionals are able to get back to work as soon as it’s safe to do so.

“It’s become increasingly clear lenders are eager to do business,” he says. “Two weeks ago, many banks retreated to the safety of more conservative lending criteria as they were overwhelmed by calls in the wake of two Bank of England rate cuts and the shut-down of many international call centres.”

“But in recent days we’ve seen the major lenders coming back, raising the loan-to-value ratios they are willing to lend at, eager to gain market share. All they need to get the borrowers moving is a functioning housing market."

Knight Frank’s five-point plan to reignite the UK’s housing post-Covid include:

  • Implement a stamp duty holiday
  • Extend Help to Buy
  • Review the conveyancing process
  • Introduce virtual planning meetings
  • Offer greater flexibility around planning obligations, S106 and CIL requirements

To ensure the UK’s housing market is kick-started post lockdown, Knight Frank analysts have mapped out a series of critical government-led measures to drive liquidity in the housing market, support the wider economy and boost receipts for exchequer.

However, measures to help stimulate demand may fall flat without supply-side support, says Olivier Knight, research associate at Knight Frank.

“Initiatives designed to keep the planning system moving have already been made, with the Coronavirus Bill effectively allowing councils to hold virtual planning meetings, but more can be done,” he says.

According to Gammon, an extension of time to implement existing and pending planning permissions would be a start – one that has the backing of the HBF, the trade body for the home building industry.

There is also a precedent with the government having granted similar temporary powers between 2009 and 2012 following the financial crisis.

Gammon concludes: “Greater flexibility should also be encouraged with regards to the payment of planning obligations, such as section 106 and Community Infrastructure Levy (CIL) payments. Such outlays are generally paid up-front and – given expected limited cash-flow over the coming months - a move to allow practical staggering or staged payments would be welcome.”

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