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Government considering 50-year mortgages that children can inherit

The government is considering plans to offer homeowners longer mortgages, including 50-year deals, that can be passed between generations, in a bid to stimulate housing demand and help more people gain a foot on the housing ladder.

The Japanese-style longer lending agreements could see people being able to buy a home with little or no expectation of completing mortgage repayments during their lifetime.

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Instead, the property and outstanding debt would be passed on to their children.

Longer loan durations would allow home buyers to pay more for properties because they would have lower monthly payments.

With the housing market slowing, the government is keen to boost demand and is also considering 30-year fixed rate home loans, mortgages worth almost 100% of the property and ways to blend renting and owning a property.

Government attempts to make UK housing more affordable could push up property price.

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“We want to find all sorts of creative ways to help people into ownership,” Johnson told the pres. “We need young people to have the confidence, to have the deposits, the mortgage packages to be able to get into ownership.”

The most popular mortgage length among first-time buyers is around 30 to 35 years but a multi-generational approach could extend that by decades.

But some commentators warned it would not address problems of low housing supply.

Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, said: “I feel that Boris Johnson is coming at this from the wrong direction.

“It is not the mortgage market that is preventing people from becoming homeowners; it is the cost of property in relation to people’s earnings.”

By MARC DA SILVA

Source: Property Industry Eye

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UK House Prices Forecast to Fall in H2 by Pantheon Macroeconomics

UK house prices will fall in the second half of 2022 as a surge in mortgage rates continues over the summer says Pantheon Macroeconomics.

Analysts at the independent research providers and consultancy say rising interest rates at the Bank of England mean monthly mortgage payments for the average borrow-
er will be £300 higher in July than at the end of 2021.

In a new research note out June 27 Pantheon Macroeconomics says although house prices will continue be supported by the solid labour market and by savings build up during the pandemic, the hit from higher rates will dominate.

“The recent surge in risk-free interest rates and mortgage rates has been so severe that we now doubt that a period of falling house prices can be avoided,” says Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics.

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The call comes amidst an ongoing rise in house prices with Nationwide’s House Price Index showing UK house prices posted a tenth successive monthly increase in May to keep annual price growth in double-digits.

Nationwide said prices were up 0.9% month-on-month and 11.2% year-on-year after taking account of seasonal effects.

“The housing market has retained a surprising amount of momentum,” said Robert Gardner, Nationwide’s Chief Economist, but Nationwide nevertheless continues to expect the housing market to slow as the year progresses.

Pantheon Macroeconomics says the average quoted rate for a two-year 75% Loan to Value fixed rate mortgage rose to 2.63% in May, up from 1.53% in November which is the fastest six-monthly increase since 2003.

“This rate will rise considerably further over the summer,” says Dickens.

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She notes the two-year overnight index swap rate has risen to 2.7%, from 2.2% at the start of May, “and mortgage rates hadn’t fully reflected the prior surge in OIS rates last month”.

Pantheon Macroeconomics calculates the equivalent mortgage rate likely will jump to around 3.2% in July, before reaching 3.8% by December.

But even rates for 90% and 95% LTV ratio mortgages have risen, despite the continued tightening of the labour market.

“Changes in mortgage rates have been a good guide to changes in year-over-year growth in house prices in the past,” says Dickens.

She calculates year-over-year growth in house prices could decelerate by as much as 30 percentage points over the next year.

This would imply that UK house prices would fall outright by about 20%.

But there are further factors to consider that would cushion against such a fall, most notable the strong jobs market that conveys security to home owners and prospective buyers as well as changing work habits.

“We now expect house prices to fall by around 2% in the second half of the year, rather than just hold steady,” says Dickens.

By Gary Howes

Source: Pound Sterling Live

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Property market investment is crucial to economic recovery

The past two years of economic uncertainty, induced by the global pandemic, have impeded strong performances across most industries. Certainly, all will be glad to see the back of the restrictions and lockdowns that strained growth as businesses seek to recover.

Yet, amongst the volatility, the UK property market once again flourished, highlighting the sector’s reliable reputation in such times.

This resilience was likely made possible by investors seeking financial opportunities that have been historically more reliable during a period where other potential assets have not looked as secure.

What’s more, there appears to be no slowing down, with buyers snapping up property faster than ever, twice as quickly as they did in 2019, according to data from Rightmove.

Alongside thriving market activity is the rise in house prices that continued surging even throughout the pandemic. According to Nationwide’s April House Price index, average house prices have reached £267,620, with price rises increasing higher than 10 per cent in each month but one in the past year.

Despite positive growth, the industry must remain prepared for potential challenges ahead. The rate of buying is a consequence of a shortage of property, a situation that cannot continue forever. And pundits have predicted house prices to be pulled back down by the cost of living squeeze and rising mortgage rates.

This is why many will be hailing the return of international investors since the end of Covid restrictions at the start of the year.

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Why is overseas investment important?
The health of the economy and the health of the property market are closely linked. Consumer spending and borrowing are affected by house price increases or dips. As such, receiving overseas investment will be crucial for maintaining the growth of the market and, in turn, the UK’s economic recovery.

And judging by the figures, this is anticipated to be the case since travel restrictions into the country were dropped in February.

According to Knight Frank’s City Wealth index section of their 2022 Wealth Report, in 2021 London saw more cross-border private capital in real estate than any other city in the world, with more than $3bn (£2.39bn) invested. Their forecasts estimate this trend to continue over 2022, with a further $24bn expected to be invested in the capital.

When taking into account the ongoing housing crisis that desperately needs to be tackled, a significant boost in investment would be welcomed in order to address the vast undersupply in housing.

To offset the shortage, the UK needs to be building 340,000 new homes a year, of which 145,000 should be affordable. However, only approximately 216,000 new homes were supplied in 2020-21.

More often than not, news of international investment flows into the UK property market is met with some disdain due to negative connotations linked to the housing shortage. However, foreign investment can ensure the commencement of property development by buying new residential units off-plan and funding development schemes.

This is a huge positive when considering the slowdown of construction activity due to problems associated with the pandemic.

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It is not just the capital where these projects are taking place. International investors are placing bigger bets on areas outside of London such as the West Midlands and the North of England, with the likes of Manchester, Leeds and Newcastle becoming recognised as better value for money investments.

At the same time, investment in regional areas has been bolstered by a change in homeowner preferences. Many households are now seeking bigger homes outside of the city, suited to home-working needs, and increased investment flow has the potential to boost their development of new housing for years to come.

Could external factors delay international investment flows?
While the return of international investment is certainly promising for the property market, it is important to recognise the wider macroeconomic headwinds that have the potential to slow down the market’s growth outlook.

For one, the steady climb of interest rates poses added challenges to investors.

The base rate, which recently rose to 1 per cent, influences the interest rates that many lenders charge for mortgages, loans and other types of credit. For investors, this means taking into account higher mortgage rates in line with rising interest. This in turn poses risks to the pace of real estate development.

Elsewhere, there is soaring inflation and a cost of living crisis to contend with. The Bank of England has warned that prices might rise to 10 per cent this year, a 40-year high, and this jump in inflation coupled with the rising interest rate could erode rental returns and devalue property if house price growth slows, which commentators are anticipating.

However, despite the above, UK property has long been considered a safe bet for international investors, and it is unlikely this will change any time soon. Capital from areas such as Hong Kong, China and the US remains strong. Also, the drop in the pound since Brexit has allowed for more favourable exchange rates that stretches investors’ money further.

Looking ahead, it becomes essential, then, that the expected return of global investment flows is used to its full potential. Doing so will be key to ensuring the continued strength of the property market and, ultimately, the pursuit of a steady economic recovery.

Jamie Johnson is chief executive of FJP Investment

By Jamie Johnson

Source FT Adviser

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House prices set to rise further based on transactions currently underway

UK house prices look set for new record highs in the coming months despite the cost of living squeeze.

Residential property prices have continued soaring in recent months despite 30-year high inflation and a worsening cost-of-living crisis, and the signs are that they will rise further in the coming months in light of the ongoing supply-demand imbalance.

The imbalance between supply and demand will continue to drive prices upwards through the spring despite growing pressures on household finances and rising borrowing costs, with the average property price in England and Wales set to hit a new record high of £389,712 in June 2022, according to the reallymoving House Price Forecast.

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The supply crunch, which has seen the volume of properties for sale plummet to record lows, combined with unseasonably strong buyer demand, is preventing sale prices from falling, as would normally be expected when households experience sudden financial pressure.

Reallymoving captures the purchase price buyers have agreed to pay when they search for conveyancing quotes through the comparison site, typically 12 weeks before they complete. This enables reallymoving to provide a three – month house price forecast that historically has closely tracked the Land Registry’s Price Paid data, published retrospectively.

Based on deals already agreed between buyers and sellers, prices will rise by 4.7% in April and 6% in May before slowing to growth of 1.3% in June – a direct result of buyer competition for a limited supply of homes during the early months of the year.

However, the market is expected to flatten later this year as inflation bites further and mortgages become more expensive.

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Rob Houghton, CEO of reallymoving, commented: “House price forecasts for the coming quarter suggest we’re heading into a period of strong price growth, but when taken in the wider context what we’re actually seeing are prices being inflated by a severe supply squeeze. This is forcing the market upwards, masking the impact of inflation and rising costs on household budgets which we would normally expect to rein in price growth.

“Having less money in their pockets will ultimately deter people from taking on more debt as they move up the ladder, and at some point in the near future this will slow house price growth. Much will depend on the volume of new listings we see coming onto the market and the speed at which lenders push up the price of fixed rate mortgages.”

By MARC DA SILVA

Source: Property Industry Eye

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Factors that impact the UK property market in 2021

It is absolutely fair to assume that 2021 will have its fair share of uncertainty, especially concerning the property market in the UK. In 2020, when Covid-19 came into being, the housing market and the real estate market in the UK and all over the world were severely impacted. While we have seen many government schemes come into play to boost the real estate market and the economy as a whole, no expert can predict with any amount of certainty what the future of the UK property market holds. However, here are some important factors that will have an impact on the UK property market in 2021.

Stamp duty holiday

After the first lockdown, the government introduced the stamp duty holiday in July 2020 in the UK. The stamp duty holiday was a temporary suspension of the stamp duty that needs to be paid by the buyer when he or she purchases real estate. The government announced the stamp duty holiday to boost the buyer’s confidence, revive the real estate market and make housing slightly affordable. Due to its enormous success, the stamp duty holiday has now been extended till September 2021. Whether the government decides to further extend this temporary suspension on stamp duty and how the real estate market will react to the suspension or introduction of stamp duty will have a huge impact on the real estate market in the UK.

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Change in buyer demand

As more and more people have started working from home, there has been a significant shift in buyer demand and the priorities of the buyer. Earlier, potential buyers would look for properties in the city centre which are close to their place of work. Now, homeowners and potential buyers have started looking at properties in the outskirts and the boroughs. One reason is that homeowners and professionals are looking to shift into bigger places as they wish to improve their standard of living since they are not spending more time at home. Secondly, the average price of the property in the suburbs and boroughs is relatively cheaper than in the city centre, which allows homeowners and potential buyers to purchase spacious properties at affordable prices. Also, there has been an increase in demand for properties with spare bedrooms, maybe an outhouse or a garage space, to convert these spaces into work from home offices. This change in buyer demand will certainly play a big role in the future of the real estate market in 2021.

Low deposit mortgages

Earlier, it was very easy for first-time buyers and potential investors to get low deposit mortgages. However, due to the uncertainty of Covid-19 and the increase in unemployment, banks and lenders have drastically reduced the availability of low deposit mortgages, to a point where it barely exists in today’s lending market. However, the UK government has announced a mortgage guarantee scheme under which buyers and investors will be able to secure a mortgage by paying only 5 per cent of the deposit. Low deposit mortgages will have a great impact on the future of the real estate sector. If this scheme leads to an increase in the demand for housing and helps revive the property market, then it will be a game-changer for the real estate industry as well as for lenders and banks.

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Change in the average price of property

What factors affect the price of property? First and foremost, the supply and demand of real estate and housing will play a big role in deciding the price of property in certain areas. Secondly, the availability of mortgages and the rate of interest will play a role in the number of properties that are actually sold. Due to the uncertainty around Covid-19, banks and lenders became very strict about their lending criteria, which took a toll on the housing market. And, the criteria started becoming stricter, the number of mortgages in the market started to fall, hence, there was a significant change in interest rates. Inflation and unemployment also play a big role in deciding the average price of property, as inflation rates and unemployment rates affect the economy as a whole. And of course, political uncertainty caused by Brexit also took a toll on the real estate sector. Therefore, multiple factors, such as the ones listed above, play a big role in determining the property’s average price, which will ultimately impact the UK real estate industry.

Source: News Anyway

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Housing market set to be busiest since 2007, Zoopla says

This year’s housing market is on course to be the busiest since 2007, according to a property website.

Around 1.52 million UK house sales are expected across 2021, up by 45% compared with last year, Zoopla said.

The value of homes sold in 2021 is projected to reach £461 billion, up by 46% or £145 billion.

The website said that, with average annual transactions rarely exceeding one million to 1.2 million per year over the past decade, this would mark the highest sales figures since 2007.

The stamp duty holiday in England and Northern Ireland and its subsequent extension has provided an added impetus for many people to purchase a home, its report said.

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Households who have the opportunity to commute less frequently have more options when it comes to choosing where to live, and this could prompt a move

Grainne Gilmore, Zoopla

It said the hottest sales markets currently include Wales, Yorkshire and the Humber and the North West of England – particularly Liverpool, Manchester, Wigan and Burnley.

Some areas are bucking the trend, with properties in inner London taking nearly two weeks longer to go under offer typically compared with 2020.

Homes in Southampton, Gloucester, Edinburgh and Coventry are also spending longer on the market, although price growth remains positive across these cities, Zoopla said.

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The website said that overall, 2021 is projected to be among the 10 busiest years since 1959.

Grainne Gilmore, head of research at Zoopla, said: “Households who have the opportunity to commute less frequently have more options when it comes to choosing where to live, and this could prompt a move.

“Likewise, older households will continue to review how and where they are living, with many more set to move for the first time in years. With an increased array of mortgages to choose from, first-time buyers will also remain active in the market.

“At the same time, supply constraints will continue to underpin pricing. The lack of supply is expected to hamper potential sales during this year, yet even so, we expect total transactions this year to rise to 1.5 million, marking one of the busiest years in the UK’s residential market in more than a decade.”

Source: Express & Star

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Long-term stimulus needed to bring the housing market to life

Long-term stimulus is needed to bring the housing market fully to life, and avoid short-term peaks and troughs, according to Robert Burdett, managing director of James Leigh property Management.

Burdett believes that the stamp duty holiday is an unprecedented and very welcome shot in the arm for the housing market when it was desperately needed.

However, he said: “But with lockdown now easing and COVID-19 firmly in retreat, now is the perfect opportunity to be looking at how the housing market can be built on firmer foundations than it has previously enjoyed.

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“The introduction of the 95% mortgage is a welcome move for first-time buyers, but more needs to be done to ensure the whole market can enjoy a stable future.”

Lending criteria currently prevent some buyers from accessing mortgage finance because on paper their income is not high enough to meet the lender’s criteria for income, even though they may be paying more in rent than they would be for a mortgage.

Data released by Estate Agency firm Keller Williams show the changing pattern of where people want to live, and the outdoors features strongly in the research.

Burdett said: “The research published by Keller Williams shows that the COVID-19 pandemic has changed the way people are thinking about the homes they want to buy.

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“Working from home in particular means that people are not as reliant on access to the cities, and so can buy where they want to live rather than where they need to access work.”

Support for the housing market for the long term could include a continuation of the Help to Buy scheme and reform to the mortgage industry so that affordability reflects current household expenditure.

Burdett added: “In the end, the housing market needs measures in place that will flatten the bumps in the road and create a sustainable future market.

“If the stamp duty holiday has taught us anything, it’s that short terms measures whilst useful at the time, do nothing for longer-term stability and growth.”

By Jake Carter

Source: Mortgage Introducer

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Covid-19 has changed what buyers and renters find essential

More than a quarter of the UK’s renters and homeowners (26%) have found their property needs have changed since the outbreak of Covid-19, according to new research from Gradual Homeownership provider, Wayhome.

After more than a year of remote working and months of non-essential shops and eateries being closed to the public, previously “high-valued” property amenities have slid far down the priority list. Indeed, among the renters and homeowners whose property requirements changed amid the pandemic, the least important features are now having an easy commute to work (17%), being close to shops and restaurants (17%) and living near public transport (14%).

Wayhome’s research indicates a new set of property amenities will take precedence once lockdown lifts, given the prolonged time spent at home and likelihood of hybrid working for office-workers going forward.

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Indeed, when asked which property features had become more important since March 2020, more than a quarter (26%) said having the space for a proper home office was increasingly critical. And, given the fact so many working parents have had to juggle work and childcare commitments, the need for decent office space rose to 30% for parents, compared to 22% of non-parents.

As well as specific space for a home office, lockdown has caused a general desire for more space, be it for work or leisure. Almost a third (30%) of all homeowners and renters wanted more space in general, and a quarter (24%) said having a bigger bedroom was necessary.

And as more of us have spent time indoors, having access to a private garden has become increasingly important. 36% said this had become more important over the past year – a more popular desire among older people, especially 55-73 year olds at 52%, falling to 43% of 43-54 year olds and 35% of 24-42 year olds.

Similarly, a fifth (21%) of all respondents felt living near a public garden or green space was important to them, and the same number prioritised being near friends and family – a feature that resonated higher among women (25%) than it did for men (17%).

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Features which have become more important post-CovidFeatures which have become less important post-Covid
Garden (36%)Having an easy commute to your workplace (17%)
More space (square footage) (30%)Being close to local shops/pubs/bars and restaurants (17%)
A home office (26%)Being near public transport (14%)
Bigger bedrooms (24%)Balcony (13%)
Being near my friends/ family/ support network (21%)A home office (13%)
Being near public garden/ green space/ woodlands (21%)Off-street parking (13%)
Having an easy commute to your workplace (17%)Playroom for children (12%)
Being close to local shops/pubs/bars and restaurants (17%)Bigger bedrooms (12%)
Playroom for children (15%)Being near my friends/ family/ support network (12%)
Off-street parking (15%)More space (square footage) (12%)

This research looking at the impact of the pandemic on people’s changing property needs comes ahead of the launch of a report by Wayhome on the challenges facing the UK’s renters and homeowners.

Nigel Purves, CEO of Wayhome commented: “When you’re narrowing down your search for the perfect home to rent or buy, most of us will have a wish-list, usually split into the “essentials” and “nice-to-haves”. Our upcoming report makes it clear just how far these wish-lists have changed as the pandemic rolled on. In most cases, we’ve seen a complete reversal, with potential renters and homeowners prioritising the things that would make living and working in that space the most comfortable and fit for purpose.

“While having the flexibility to pick and choose a desired property based on its amenities and special features doesn’t seem too much to ask – for a lot of people it’s near impossible. Far too often renters are being driven into buying smaller first-homes or properties in locations that aren’t suitable. Despite earning a good income, affording a deposit big enough to secure a suitable home and hitting the affordability criteria set by mortgage lenders is unsurmountable – as evidenced by the fact full-time workers would need to spend at least 7.8 times their annual earnings to be able to afford a home in England*.

“With the end of lockdown in sight, now would be an opportune time for the industry to reassess the actual needs of renters and homeowners post-pandemic and support innovative and alternative routes that get more people onto the property ladder.”

BY MARCO CALLEGARI

Source: Property Wire

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UK mortgage approvals reach highest level since 2007

The number of mortgage approvals reached their highest level since 2007 last year as buyers took advantage of the stamp duty holiday.

The housing market remained resilient in the face of volatility and essential closure of the market during the first lockdown.

There were 818,500 mortgage approvals over 2020, up from 789,100 the previous year, according to Bank of England data released today.

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There was a significant uptick in lending in the second half of the year after a record low of 9,400 approvals in May. Borrowers rushed to take advantage of the stamp duty holiday introduced over the summer.

Although approvals fell back to 103,400 in December, down from 105,300 in November, it was still the highest level since August 2007.

Former RICS residential chairman Jeremy Leaf is not complacent: “While these figures are always a good indicator of direction of travel for the market, we won’t be getting carried away, not least because the year’s lower for these approvals appeared a couple of months after the first lockdown.”

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Additionally this level of momentum is unlikely to be sustained as the stamp duty holiday winds down at the end of next month.

Samuel Tombs, Pantheon’s chief UK economist predicts the vaccine rollout will also mean “people will be content again with their pre-pandemic housing choices by the summer.”

The BoE’s data also showed that consumers paid down a record £16.6bn in debt last year as spending options became limited during lockdown.

“An overall reduction in consumer debt, combined with high levels of cash savings, and pent up demand for holidays, meals out and other leisure activities, could prove to be an explosive powder keg that will help drive the economy when it finally opens up again,” AJ Bell financial analyst Laith Khalaf says.

By Angharad Carrick

Source: City AM

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Housing market experiences busier than usual December

A major estate agency experienced a busy December, despite activity dropping off from November.

NAEA Propertymark found there were eight sales per branch in December, the highest since 2006.

Meanwhile there were an average of 348 prospective buyers per branch, the most since December 2016.

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NAEA PropertyWire attributed the busy December to the stamp duty holiday.

Despite the market being stronger than normal, the number of buyers registered per branch actually fell by 41% from 580 in November.

Meanwhile the number of sales agreed fell from 13 in November.

Mark Hayward, chief policy advisor, Propertymark, said: “The number of potential buyers in the market fell significantly in December after Novembers’ record high.

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“While we would ordinarily expect to see a lull over the festive period, these numbers show that the tightening of lockdown restrictions, coupled with the reality that many individuals would no longer meet the stamp duty deadline, has exacerbated this.

“As we approach the stamp duty, LTT and LBTT cliff edges on the 31 March, we are increasingly concerned about the pressure this is placing on the property industry with more than two-thirds (69%) of estate agents expecting to see an increase in failed sales due to buyers realising their sales will not complete ahead of the deadline. It’s important that action is taken now to prevent this and support the property sector.”

BY RYAN BEMBRIDGE

Source: Property Wire

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