Knight Frank has predicted that the number of home sales in 2020 will decline by 526,000, a fall of 38% on 2019 transaction levels.
It said that the response to the Covid-19 pandemic has “utterly transformed” the current economic and housing market landscape, and the leading agency is now calling on the government to issue a stamp duty holiday.
Despite the fact the government will forgo a “significant amount” of stamp duty revenue in 2020, the agency said it was clear that a holiday would “actually get the market moving once the lockdown is lifted”.
Knight Frank warned that a stamp duty holiday “alone will not be enough”, however, and is therefore calling for further measures across a wider number of areas, including an extension to Help to Buy to support first time buyers and support activity across all price bands.
As well as a 38% decline in transactions, Knight Frank also predicted that there will be a £7.9bn loss in DIY and renovation spend and a £395m loss across removals companies.
It warned that this drop in economic activity will have a “huge impact” on the exchequer, with a loss of £4.4bn in stamp duty accompanied by a decline of at least £1.6bn in VAT and “significant declines” in personal and business tax revenue.
It warned that fewer house purchases will also lead to a sharp decline in mortgage activity. The agency predicted that 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”.
Simon Gammon, managing partner at Knight Frank Finance, said that it is “becoming increasingly clear lenders are eager to do business”.
He said: “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 many of the major lenders have been coming back, raising the loan-to-value ratios they are willing to lend at, eager to gain market share.”