Top agent tells PM that stamp duty chatter is causing market “paralysis”

A well-respected agent who was president of the NAEA just five years ago has written to Prime Minister Boris Johnson asking him to be clear and immediate in his stamp duty plans, to avoid further damage to the housing market.

Simon Gerrard, managing director of his eponymous agency in London, warns in a letter to the PM - seen by Estate Agent Today - that the market is “heading for disaster” and “in absolute paralysis” with both buyers and sellers waiting to see if there is clarity on stamp duty. Or, as Gerrard tell Johnson, “whether your bright new future actually emerges.”

Gerrard says it’s time for the government to “walk the walk and not just talk the talk” and he is especially critical of new Housing Secretary of State Robert Jenrick who told a recent radio interview that people would have to “wait and see” if there was stamp duty reform in the near future. 

“This ultimately has a compound effect on the market as people will be now be encouraged to wait before moving, in the hope it will come to pass. You really need to act on this NOW before the unintended consequence places further downward pressure on prices and transactions” Gerrard tells Johnson in the letter. 

Ironically, Gerrard tells the PM that he agrees with one of the stamp duty reform proposals talked of; that is, switching the duty from the buyer to the seller.

“I believe that this would provide a much-needed boost to the market and support those moving up the property ladder, currently being taxed on their aspirations” writes the London agent.

The rest of his extensive letter covers his concerns - mirroring those of the wider industry - that the current government has gone too far on private rental sector reforms.

Even if some of these were justified, he says, the execution has been too severe.

“Under the leadership of a Conservative Government, in recent years there has been a barrage of legislation serving to deter medium-size investors from purchasing buy-to-let properties. 

“With the growth of the private rental sector and the number of young voters renting, landlords have been an easy bogeyman for politicians to target with fresh regulation and policy, in order to try and grab the millennial vote. 

“As a result, we presently have a market where rental supply is dwindling, because landlords, unable to achieve a realistic investment return thanks to current legislation, decide they have no option but to sell up. Every departure shrinks the pool of rental properties further, at a time when we surely should be doing all we can to increase the number properties available for both purchase and rental.”

You can read the letter in full below.

Dear Mr Johnson

RE: WE ARE HEADING TOWARDS A HOUSING DISASTER OF MONUMENTAL PROPORTION THAT REQUIRES YOUR INTERVENTION.

My name is Simon Gerrard and I am Managing Director of Martyn Gerard Estate Agents, a multi award-winning, multi-disciplined estate agency that deals with sales, lettings and commercial property, as well as property management. Having been in business for over 55 years, we have weathered many different market phases and pride ourselves on our detailed knowledge of the North and Northwest London area. I was also elected president of the National Association of Estate Agents (NAEA Propertymark) in 2014, and have therefore travelled across the country and discussed the state of our property market with agents across the nation. 

The reason I believe that we are heading for a housing disaster is that, under the leadership of a Conservative Government, in recent years there has been a barrage of legislation serving to deter medium-size investors from purchasing buy-to-let properties. With the growth of the private rental sector and the number of young voters renting, landlords have been an easy bogeyman for politicians to target with fresh regulation and policy, in order to try and grab the millennial vote. As a result, we presently have a market where rental supply is dwindling, because landlords, unable to achieve a realistic investment return thanks to current legislation, decide they have no option but to sell up. Every departure shrinks the pool of rental properties further, at a time when we surely should be doing all we can to increase the number properties available for both purchase and rental. 

There seems to be a misconception that corporate entities and build-to-rent will somehow solve the problem of rental property supply, but this belittles the significant contribution of smaller landlords. While build to rent has been supported, there are no planning incentives linked to this and we have seen multiple deterrents imposed upon the small to medium sized landlord – from the 3% additional rate of Stamp Duty Land Tax (SDLT) on purchases of second homes to the Finance Act, which has meant landlords pay tax on turnover rather than profit. In addition, HMO licensing and handing control over this to councils creates an additional cost and is unfortunately also unfairly impacting good agents and landlords. Then there is the ban on fees to tenants, which has meant that responsible landlords must absorb the cost of referencing, cleaning and inventories.

While I fundamentally agree with many of these measures, in general they each go a little too far, imposing repeated and unfair additional cost to the good landlord, not just the bad! This strain has now been added to by the Government’s decision (this is only a proposal at the moment along with other tinkering with the PRS) to remove section 21 no-fault evictions, which I believe will be the straw that breaks the camel’s back. With such limited return and enormous financial risk, who would invest in a Buy-to Let property??

While in principle it is right to protect tenants from unfair eviction, in practice removing Section 21 will make it even harder for landlords to evict troublesome tenants, and will therefore act as an even greater deterrent. The reality is that courts are already overburdened and will be unable to deal with an increase in Section 8 notices (these are presently taking six to nine months to be heard) which will now be required to evict tenants who have been disruptive or even stopped paying rent. The promise of dedicated housing courts to deal with this is a lovely idea, but at a time where finances are tight and need to be efficiently and effectively channelled, I question whether it is realistic to commit to the enormous cost that will be necessary to set these up, even if they are logistically possible.

Added to all of this are threats of possible rent caps from the Mayor of London, which although wildly unrealistic only serve to further spook already rattled landlords. One of the only encouragements for landlords at present is the increasing demand for rental property, thanks to the Government’s role in stemming supply, so removing the free markets ability to begin to balance this would be a disaster.

An area where I do fully support your proposed approach is with respect to stamp duty, and in particular the suggestion of switching responsibility for this to the seller instead of the buyer. I believe that this would provide a much-needed boost to the market and support those moving up the property ladder, currently being taxed on their aspirations. As it currently stands, the market is in absolute paralysis, with both buyers and sellers deciding to wait things out to see whether your bright new future actually emerges. Each day of uncertainty costs the UK economy dear. It’s time to walk the walk and not just talk the talk.

A word of caution - with your suggestions already mooted in the press, this is in fact now having a detrimental effect on the market. In an interview recently Mr Jenrick said ‘wait and see’, but this ultimately has a compound effect on the market as people will be now be encouraged to wait before moving, in the hope it will come to pass. You really need to act on this NOW before the unintended consequence places further downward pressure on prices and transactions.

A stamp duty switch is a policy suggestion that I have been actively championing for a number of years and I enclose a letter sent to Housing Ministers (of which there have been a few) and your current Chancellor, Sajid Javid, when he was Secretary of State for Housing, Communities and Local Government. Despite the fundamental importance of the UK housing market, especially in a post-Brexit environment, my proposal was dismissed, primarily due to a lack of understanding on behalf of government officials as to how the initiative would work. As you are aware it is imperative that, with us leaving the EU on 31st October, we have a strong economy. Since the UK economy is underpinned by the property market it urgently needs a boost that will support and encourage international investment, those looking to move, and also to help first time buyers enter the market, so this policy is one that I believe needs to be pursued and acted on immediately. 

I would welcome the opportunity to contribute to the Governments thinking on this key issue, as I believe that my experience and knowledge of the present market, and insight into the possible unintended consequences of housing policies currently being pursued, may be particularly helpful to you and your team of advisors. You will see from the accompanying letter that I also have concerns and potential solutions to help boost supply in the wider housing market, which I would be happy to discuss. I am sure you are well aware that a healthy housing market is essential in supporting a strong economy, something that will be vital as we edge ever closer to exiting the European Union.

Housing is without doubt the crisis of our time. The solution is in your hands and all it takes is for you to be the man of action the country now so desperately needs.

 Many thanks for your time and I look forward to receiving your response. 

All the best

Simon Gerrard

Managing Director, Martyn Gerrard Estate Agents