VAT rises in 2011 will make the whole property purchase procedure more costly, says Harpal Singh, managing director of Conveyancing Alliance Ltd
It was interesting to read a statistic that suggested an analysis of corporate properties revealed it was taking on average 72 days for a property to sell in the current market. Given the significant shift we have seen in the property and mortgage markets over the past few months, my own feeling is that residential property sales could be taking much longer and that as each week passes the number of days will increase.
In effect, by the time you read this the number could be up to 90 days and let us not forget that this is simply an average some properties will be taking much longer to move depending on many factors, not least, how realistic is the asking price? Many vendors will have put their property on the market because they saw an increase in house prices towards the start of the year if recent house price indices tell us anything it is that house prices have begun to fall again.
Dealing with estate agents constantly we are aware that a major challenge is dealing with unrealistic vendors. Property will shift if it is priced correctly, however, if the vendor is of the mind-set that prices are still moving upwards then squaring the circle of the agent’s valuation and the price the vendor wants to start marketing at, can be most difficult.
But, back to the 72 day selling period. It is an oft-used refrain that Christmas ‘seems to get earlier every year’. With Christmas advertising already beginning, decorations available to buy in the shops and temperatures having dipped, many people are already planning and preparing for the festive period and the end of the year. The sense of wanting to get things done before Christmas is no different in the property market and any clients who want to be in new properties by the 25th December are clearly going to need to pull their fingers out and get moving with their housing transaction.
There is of course another major bonus for clients who want to sell and/or buy before 2010 comes to an end, and it comes in the form of VAT. As you will know the Chancellor announced a 2.5% increase in VAT back in the middle of the year during the Emergency Budget, and this is due to be begin from the start of January 2011. Clearly, an increase in VAT is going to add extra cost to the whole property purchase be that in terms of estate agents’ fees, conveyancing fees, increases to removal costs, etc.
Clients may not truly be aware of the added cost this will add to all property transactions from 2011 and it is the broker’s responsibility to point this out because some added urgency on the part of everyone involved in the transaction could save some much-needed cash if it can be completed before the end of the year.
This is therefore a strong message to get out there, to try and get the pipelines moving and, if needed, to chivvy clients along to ensure they are not out of pocket if the transaction slips into next year. Vendor clients should be aware that we are now firmly in a buyer’s market if they have a relatively strong offer on the table and they want to have everything wrapped up in less than two and a half months then now is the time to perhaps accept and get on with the process of completing the deal and getting moved.
The simple fact of the matter is that buyers are now in pole position they are calling the shots when it comes to timescale and therefore sound offers which are near asking price are worth their weight in gold, particularly to the vendor with a timescale to meet. Add on the fact that not completing before Christmas means that all parties are going to have to fund a VAT hike as well and it surely becomes appealing to get moving sooner rather than later.