Failed house sales cost UK economy at least £1.5bn a year, says bank

``

House sales that fall through are costing the UK economy at least £1.5bn a year, research from Santander (BNC.L) has shown. ``

The bank found that there are more than half a million (530,000) house sales that fall through each year in England and Wales, which is costing UK consumers £560m directly, as well as resulting in a further £950m hit to the wider economy. `` ``

That's according to Santander's "Fixing the broken chain" report, published on Wednesday, with the findings based on independent economic analysis from WPI Economics and a survey of more than 2,000 consumers by research firm JL Partners. ``

The report highlighted that nearly a quarter (23%) of consumers will have experienced a property chain fail. ``

The economic analysis showed that the direct cost to consumers of this through expenditure on elements such as mortgage and solicitors’ fees that consumers cannot recoup, is £560m annually. ``

Read more: Bank of England set to hold interest rates ``

This is 40% higher than the £400m estimate used by the government earlier this year, when it set out plans to modernise and streamline the way people buy and sell property. `` ``

The research revealed that approximately 85% of people who experienced a transaction failure reported some sort of financial loss. While the average cost stands at £1,240 per failed recent transaction, one in five people reported losses of more than £2,000. ``

Santander's report also highlighted the cost to the wider economy. This included £380m attributed to the loss of work output due to stress and the time taken to buy a property within work hours, a £400m cost to people’s reduced wellbeing and £170m lost to the economy due to leisure time wasted buying-related admin activities. ``

More than half (54%) of homebuyers said they were constantly or frequently stressed throughout the transaction. This was more acute among those who suffered a failed transaction, with 64% saying their stress levels were higher than normal, 57% reporting increased anxiety, 49% suffered from sleep disruption and 26% experiencing strain in their personal relationships. `` ``

Santander's research showed that while the early stages of the homebuying journey, such as making an offer or securing a mortgage, were generally manageable for most buyers, it is later in the process where difficulties arise and transactions increasingly fail. Less than a fifth (17%) of unsuccessful transactions collapsed after one month, while 43% of failed transactions happen at or beyond the three-month mark. Even in the final stages, more than a third (38%) of people found exchanging and moving properties difficult.

Story Continues

Read more: Why lifelong housing costs are derailing retirement planning for older people

More than a quarter (28%) of homebuyers said that they were less likely to move again given their experience of the process. In contrast, the research found that a more streamlined process would make 88% of people who moved recently more likely to move again in the future.

David Morris, head of homes at Santander UK, said: "Buying a home should be a moment of excitement and hope, but for too many people, it’s an uncertain and exhausting process, that drains their mental, emotional and physical health."

“The homebuying journey is still operating in the confines of a framework that was established a century ago," he said. "This antiquated system is an increasingly heavy anchor weighing on the economy and fixing it must be key."

"While the government has put the housing market firmly on its agenda – as this research shows – the scale of the challenge remains largely underappreciated, and that’s why we’re calling for powerful reforms to give buyers and sellers more confidence, ease the financial and emotional strain and create a housing system fit for the needs of today’s consumers and economy," he added.

Santander called on the government and regulators to make a number of reforms including expediting digitisation across all stakeholders, creating a government-owned, centralised property data system and incentivising the use of artificial intelligence (AI).

Read more:

London house prices slip as sellers brace for possible tax change UK rent rises by £80 per week over five years UK faces highest borrowing costs in wealthy OECD nations, says think-tank

Download the Yahoo Finance app, available for Apple and Android.

View Comments