There is certainly more buyer activity than we have seen for over a year and this only really showed itself from 1 June, right after the half-term break. We are seeing a surge in viewings and buyer registrations and an increase in offers at more sensible ad less speculative levels. In the house market we forecast that there will be more transactions in the June/July period, than in the entire year to date. However, I would urge caution regarding prices.
The market is still absorbing the rise of the highest band of Stamp Duty Land Tax (SDLT) from 7% to 12%. What many have not factored in is that the increased stamp duty has not only reduced buyers buying power – in terms of the difference between the old and new SDLT rate – but the effect of reducing buyers cash distribution has also meant that buyers have less money to leverage mortgage borrowing. So, for example, if a buyer now has £200,000 less cash available as a deposit, that has also taken away their ability to leverage almost £470,000 of mortgage borrowing on a 70% loan – to-value mortgage. At Crayson our average selling price is £4.5m ad at that level SDLT has increased from £315,000 to £453,000. Therefore buyers have £138,000 less cash than they would have and £322,000 less of leverage-able mortgage at a 70% loan-to-value ratio. That is effectively, in this case £460,000 of buying power removed.
I think that overall we have not seen the full effects of the SDLT rise and the overall long-term ramifications, which must include the fact that people are not going to move as often as they have in the past with these levels of buying costs. I think that this factor will affect HMRC’s SDLT revenues and I am hopeful that the Chancellor will look more carefully at this in the near future.