Housing market on the brink: 500,000 fewer properties to be sold in 2020 as crisis deepens
The fall is sales will deprive the Treasury of £4.4 billion in lost income from stamp duties, as well as having a significant impact on spending in related industries. Like many other sectors of the economy, the lockdown is having a devastating effect on the housing market, as people stay at home in compliance with the government’s social distancing guidelines. Researchers from the estate agents Knight Frank have projected a fall of 38 percent in house sales, which equates to 526,000 fewer homes being sold in 2020 compared with last year.
Prior to the curfew, the company had confidently estimated that sales for the year would increase by almost 23 percent, boosting Treasury tax receipts from the housing sector by almost £2 billion to £10.2 billion.
The research also calculated that the suspended market would lead to 350,000 fewer mortgage approvals, including 150,000 to first-time buyers.
Tom Bill of Knight Frank told the Daily Telegraph that lenders were taking steps to increase their business.
He said: “It’s become increasingly clear [that] lenders are eager to do business.
“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 shutdown 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.”
The fall in sales will have a profound effect on other industries, that depend on the housing market.
According to Knight Frank, the DIY and renovations sector is likely to suffer £7.9 billion in lost revenues, with removals companies losing up to £395 million in earnings.
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Losses could be even greater if the lockdown continues into the summer months, a possibility that cannot be ruled out.
The estate agency has urged the government to offer a stimulus package to help kick-start the housing market after the health crisis has passed.
The company wants ministers to introduce a stamp duty holiday, grant an extension of Help to Buy and conduct a review of the conveyancing process, among other proposals.
The Royal Institution of Chartered Surveyors has also called on the government to abolish stamp duty for a limited period.
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However, this is unlikely to happen as it will cause a huge hit to tax receipts at a time when the Treasury can ill afford to lose any more revenue streams, as it tries to make good on its spending commitments.
This comes as pressure grows on the government to start focusing more attention on a curfew exit plan, as fears grow that a prolonged lockdown could prove catastrophic for an enfeebled economy.
The cabinet is said to be split between those in favour of lifting social restrictions as soon as possible, and those who argue that public health must take precedence over the health of the economy.
The Chancellor, Rishi Sunak, Michael Gove, the Cabinet Officer minister and Liz Truss, the Trade Secretary are known to be among those worried about the economic and social consequences of a prolonged lockdown.
The government’s dilemma has been highlighted by a report last week that said Britain could suffer its deepest recession for 300 years if the coronavirus curfew continues into the summer.
The report, produced by the Office For Budget Responsibility, indicated that the economy could shrink by as much as 35 percent this spring.
It also predicted that unemployment could surge by two million to its highest level since the nineties.
It said the jobless total would rise by 2.1 million to 3.4 million by the end of June, going from the current rate of 3.9 per cent to 10 per cent.
The OBR said unemployment would not return below 4 per cent until 2023.
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