Although record property sales and skyrocketing house prices have dominated the headlines, new figures suggest that the rosy picture of the property market is not as accurate as it may seem. Data from Quick Move Now indicates that the high-pressure property market is leading to an increase in the number of property sales falling through.
Why are buyers getting cold feet?
Quick Move Now’s figures suggest that more than one in five property sales fell through between April and June this year because of buyers trying to lower their initial offer after a sale had been agreed, or because they got cold feet and decided to pull out of the sale entirely.
The overall fall through rate for the second quarter of 2021 stood at 39%, with a year-to-date fall through rate of 38%.
Danny Luke, managing director of Quick Move Now, commented: “Whilst the government’s covid measures have done their job in terms of kickstarting the property market post-lockdown, they have also created this slightly artificial and highly pressurised market. Many properties are going under offer within hours of going on the market, and buyers are often offering above asking price to try to beat their competition."
Luke added: “The problem with this sort of dynamic, as evidenced in the fall through figures, is that the pressure can lead to impulse offers, that buyers later withdraw. This means the buyer and seller both have to deal with a failed house sale that can be costly in both time and money. In the first quarter of 2021, 12 % of failed sales were attributed to the buyer trying to lower their offer or getting cold feet. In the second quarter of the year, that figure almost doubled to 22 %. That just shows the pressure would-be buyers are under.”
“In the last quarter, we have also seen the race to beat the stamp duty holiday deadline. 11 % of sales fell through because the buyer or seller felt the sale was not progressing quickly enough. In the first quarter of this year, that figure was just 4%."
“Our figures suggest that gazumping has also become more prevalent over the last year, with around 5 % of buyers having been gazumped in the last 12 months."
The effect of the stamp duty holiday
The stamp duty holiday deadline also appears to be a contributing factor to buyers changing their minds. A further 11 % of property sales collapsed because the buyer or seller felt the sale wasn’t progressing quickly enough. Another 6% of sales fell through after the original buyer was gazumped.
Luke concluded: “Now that the stamp duty holiday has begun its phased withdrawal, I think we will see the pressure ease a little. Ultimately, the current market conditions are artificially inflated and are not sustainable in the long term, as wages simply cannot keep up with price growth. I would expect for there to be a cooling-off towards the end of the year, where we will see prices stabilise and perhaps even fall slightly."
"We have yet to see the economic impact of the end of the government’s furlough scheme and what that means for job security. I suspect the end of furlough will have an impact on buyer demand, as the public begins to again perhaps show an increased level of financial caution.”