Uncertainty in the housing market causes wave of nervous purchases

The “dysfunctional” housing market is encouraging people to pay more than expected for homes, said Sarah Coles, a personal finance analyst at Hargreaves Lansdown.

She responded to the latest RICS residential market survey, which found that 46% more RICS members saw an increase in demand during October, the fifth consecutive month that there has been an increase.

However, a net -27% expect sales to weaken over the next 12 months as the real estate market is expected to slow down once the stamp tax holiday ends on March 31, 2021.

“The housing market is at a time of great volatility.”

Coles said: “In recent months, the housing market has become increasingly dysfunctional. Frozen and fragile chains mean more frustration and more accusations. At the same time, runaway prices have led to a price premium, and the approaching stamp duty deadline is causing panic to spread.”

She added: “An agent noted an ‘unhealthy sense of panic’ among shoppers, desperate to take advantage of the stamp duty holidays. This encourages them to rush into an offer without thinking it through, so when the sale drags on, these buyers are ready to pull out.”

“The shutdown could further slow things down as realtors worry that more city employees working from home could hamper searches. There is a palpable sense of frustration among agents towards others involved in the process. Some blame the lack of surveyors. Some point the finger at moneylenders, and one, in particular, says that “the trucking profession should be carefully examined.”

“At some point in the next few months, we will see buyers realize that they are not going to close the deal before the stamp duty holiday ends. The question is whether sales will slow down at a more typical pace and price increases will stop, or if the market will be so dysfunctional by then that we will see a much more dramatic reaction.”

“You have to be very careful not to overpay.”

Tomer Aboody, director of real estate lender MT Finance, said: “The bubble that we have seen for the last three months is proving to be stronger than many could have predicted. In fact, it is the strongest performance of the housing market in more than a decade, with prices, home sales, and instructions at high levels.”

“‘This confidence in the derives from a combination of exemption from stamp duty, cheap mortgage rates and the buyers’ change in working conditions which has occurred after the lockdown.”

“With more space needed, borrowers are taking advantage of highly liquid financial markets, giving them the ability to borrow where they couldn’t in a few months once the economic ramifications of the lockdown really kick in.”

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