Knight Frank has issued some headline-grabbing predictions for the market grappling with the fallout from Covid-19

· 526,000 fewer home sales in 2020

· 350,000 fewer mortgage approvals

· £7.9bn in lost DIY and renovation spend

· £395 million lost spend for removals companies

· £4.4bn lost in stamp duty accompanied by a loss of at least £1.6bn in VAT

The fall in transaction volumes represents a reduction of 38% on 2019 and poses significant economic implications, according to new research released yesterday by the firm.

Based on the assumption that the current lockdown will remain in place through April and May, with a gradual lifting through June, Knight Frank has forecasted that the knock-on impact of the housing market shut down will also result in 350,000 fewer mortgage approvals in England and Wales this year.

This fall in activity will be multiplied across the economy.

Knight Frank’s estimate is a loss of £7.9bn in DIY and renovation spend and £395 million on removals companies.

There will be a wider economic impact, including the loss of employment and general mobility.

This drop in economic activity will have a huge impact on The Exchequer with the 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.

“Moving house has a clear multiplier effect for the economy,” said Tom Bill, head of London Residential Research at Knight Frank.

“Different-sized businesses in all areas of the economy feel these benefits, which is something the government will take into account when drawing up its post-lockdown stimulus plan.”

In addition, fewer house purchases will lead to a sharp decline in mortgage activity.

Simon Gammon, managing partner, Knight Frank Finance explains that, as a result of the lockdown, 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.

Knight Frank’s five point plan to reignite the UK’s housing post-Covid-19 includes:

· Implementation of a stamp duty holiday

· Extending Help to Buy

· Reviewing the conveyancing process

· Introducing virtual planning meetings

· Offering greater flexibility around planning obligations, S106 and CIL requirements

To ensure the UK’s housing market is kick-started post lockdown; Knight Frank analysts have mapped out a series of critical government-led measures to drive liquidity in the housing market, support the wider economy and boost receipts for exchequer.

Liam Bailey, Global Head of Research comments: “Despite the fact the government will forgo a significant amount of stamp duty revenue in 2020, it seems clear there will need to be a stamp duty holiday to actually get the market moving once the lockdown is lifted, but this move alone will not be enough – there will need to be moves 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.”

Since its introduction, Help to Buy has been of critical support to the housebuilding sector, giving developers the confidence to progress projects in what has been, at times, a slower moving market.

As such, any moves to extend the scheme will be welcomed, particularly given the anticipated drop in overall transaction volumes over the next few months.

Over the longer term, a review of the conveyancing process will be needed.

The process of conveyancing and Land Registry searches are areas that could be greatly improved and sped up to drive efficiencies, says Knight Frank.

Considerable work has been undertaken by industry bodies covering the legal and property sectors to improve the process, which needs to be supported, and removing the reliance on pen and paper and instead focusing on the implementation of blockchain, something the Land Registry has already been trialling.

But measures to help stimulate demand may well fall flat without supply-side support as well, says Oliver Knight, Research Associate at Knight Frank;:

“Initiatives designed to keep the planning system moving have already been made, with the Coronavirus Bill effectively allowing councils to hold virtual planning meetings, but more can be done.

“An extension of time to implement existing and pending planning permissions, given current barriers to developers starting on sites, would be a start, and one that has the backing of the HBF, the trade body for the home building industry.

“There is also a precedent with the government having granted similar temporary powers between 2009 and 2012 following the financial crisis.

“Greater flexibility should also be encouraged with regards to the payment of planning obligations, such as section 106 and Community Infrastructure Levy (CIL) payments.

“Such outlays are generally paid up-front and – given expected limited cash-flow over the coming months – a move to allow practical staggering or staged payments would be welcome.”