House price re-adjustment could affect fall through rate

Back at the start of the year, there was a worry that there would be an increase of fall through rates as the original stamp duty land tax (SDLT) holiday deadline approached.

It’s estimated that there are 225,000 fall-throughs each year which cost UK homebuyers £607m. This equates to roughly 1-in-4 sales falling through costing each individual buyer £2,700.*

Prior to the original March 31st deadline, property portal Zoopla suggested 70,000 transactions would miss out on the SDLT savings, raising the prospect of a spike in fall throughs.

The portal said:

“The more buyers rely on securing savings, the greater the risk of a spike in sales falling through, with a knock-on impact for whole chains of sales. If an extension fails to materialise, buyers across some chains may help to fund stamp duty costs for others in the chain to safeguard completions.”

Elsewhere there were suggestions that fall through rates could get as high as 60%, due to the logjams in the pipeline and other issues including:

  • mortgage problems
  • gazumping
  • the survey revealing problems
  • broken chains
  • conveyancing delays

In a bid to combat the risk of people pulling out of transactions due to issues flagged up in the survey, the Residential Property Surveyors Association (RPSA) launched their ‘Home Review’ service providing a snapshot analysis of key structural risks up front, warning buyers of any potential issues.

As the sector was gearing up for the end of the SDLT holiday, Chancellor Rishi Sunak moved the goalposts, and extended the holiday and added a tapering towards the end on 3rd March as he delivered his Spring Budget, this alleviated one problem with regards to fall throughs.

With the property market continuing to boom,  and a doubling of completions in March 2021 comapred to March 2020  Today’s Conveyancer reached out to the industry to see if they had experienced the predicted fall throughs or is there a worry that due to the shifting goalposts, the fall through rate spike will come later in the year.

Matthew Irving, Operations Manager at Team Property Services, said:

“The abort rate remains low by traditional levels nearer 10% than 30% but may have been higher if the extension had not happened. Most new movers are being warned that their move is not likely to complete by the new deadline and the higher stamp duty level is being factored in so should not see a surge of fall outs in June or September.”

David Jabbari, CEO of muve, commented:

“I think fall throughs are directly linked to the demand and supply factors in the market, specifically the rapidly dwindling stock.  It is causing deals to be re-priced with knock on consequences for mortgage offers etc. I think we will see quite high levels of fall through until Q3 when the market will return to a more ‘normal’ pattern.”

Rob Houghton, CEO of reallymoving, commented:

“I wouldn’t be surprised to see some fall throughs and gazundering in July as the value of the tax saving drops dramatically from 30th, but the fact that the holiday is being tapered will help. I expect there will be some readjustment in prices, but I doubt it will be significant or long-term and much depends on the strength of the economic recovery as we emerge from lockdown. We’ll also see more people negotiating new permanent working arrangements with employers which give them a lot more freedom to choose where they live, helping support activity in the second half of the year.”

Karl Knipe, Director of Kings Group LLP and Metropolis Surveying Services, said:

“I haven’t seen many transactions falling through, and those that did cited that the transaction time was too long which had resulted in the buyer’s personal circumstances changing. The want and desire to move is still there, which means people are willing to continue with the transaction.

“With regards to the tapering of the SDLT holiday, I for one don’t think there will be an increase in fall-throughs as buyers will begin to factor in their SDLT cost into their purchase.”

Sources

*Research by WiggyWam

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