Collapsed property chains are costing consumers and the economy at least £1.5 billion every year – more than the government’s own estimates – research suggests.
New research by Santander claims around half a million home sales collapse per year.
The report – Fixing the Broken Chain – based on independent economic analysis from WPI Economics and a survey of more than 2,000 consumers by JL Partners, highlights that 23% will have experienced a property chain fail.
This has direct costs to consumers, who will have spent money on mortgage and solicitors’ fees that cannot be recouped, which is thought to be worth £560 million annually.
Santander said this is 40% higher than the £400 million estimate used by the Government earlier this year.
The research reveals that approximately 85% of people who experienced a transaction reported some sort of financial loss. While the average cost stands at £1,240 per failed recent transaction, one in five people reported losses in excess of £2,000.
However, the impact is not just limited to consumers. The repercussions on the broader economy include the loss of work output due to stress and the time taken to buy a property within work hours (£380 million per year), the cost of people’s reduced wellbeing (£400 million) and wasted leisure time (£170 million).
That takes the total hit to the economy to £1.5 billion.
Santander is calling for the Government to take action, with proposals such as promoting more digitisation, upfront information and disincentivising gazumping and gazundering.
The bank has also suggested that a government-owned, centralised property data system should be created to make it easier to find information on properties.
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. 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 under-appreciated, 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.”