HMRC monthly transaction data reveals a dip in residential property sales for January.
Non-seasonally adjusted property sales were 85,520 in January – down 22.2% from December, and down 12.6% from a year earlier. Although figures have dipped, experts say this is reflective of a typical January before the pandemic hit.
Non-residential transactions reduced to 9,070; 18.1% down on December 2021 but 21.6% more than a year ago.
Recorded sales over the 2021/22 tax year so far are still higher than any other year for the past decade (currently standing at 1.167 million non-seasonally adjusted).
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown commented:
“The January chill hit the property market, rapidly cooling buyer enthusiasm, and freezing sales. It takes 16 weeks from listing a property to completing a sale at the moment, so the drop in sales reflected a glacial October, facing the chilling impact of interest rate speculation and the stamp duty holiday finally dwindling away to nothing.
We’re not expecting sales to pick up in the immediate future either. We’re battling the biggest squeeze on incomes in a generation, including a 54% hike in energy prices that’s going to force everyone to reconsider their spending. Anyone considering a move up the property ladder is going to think twice about whether this is the time to be stretching their finances even thinner. It means there’s a good chance the spring isn’t going to lift the chill in the property market.
Agreed sales have been dropping for months, according to RICS, which is starting to feed through into the official figures. Part of this was down to the fact that all the heat caused by the stamp duty holiday dissipated with the tax break. It had encouraged people to pull sales forward and was always going to mean a lull afterwards. The shortage of properties on the market played a major part too, because even where there were buyers on the books, there was very little for them to get overheated about.
Interest rates cooled the market too. October saw speculation mount of an imminent rise, and while the Bank of England didn’t act until December, mortgage companies started raising rates. In practical terms, this was a rise from incredibly low levels, and there were still rock-bottom rates on offer, However, the psychological impact of both speculation and rate rises shouldn’t be underestimated.”
Richard Pike, Phoebus Software sales and marketing director, says:
“Looking at the non-seasonally adjusted figures from HMRC today we are starting to see the trend that we were probably expecting last month. As the economy recovers, more quickly than we might have imagined according to the latest PMI survey, there is a much greater likelihood of another interest rate rise. This is perhaps the only thing that may curb the rate at which house prices continue to rise. The latest monthly report from Rightmove showed that prices had reached a 20 year high, which has to be putting many first-time buyers’ ability to get onto the property ladder almost out of reach.
Recovery, rising prices and rates. All in all it’s difficult to predict where the housing market will go next. Suffice to say that it cannot go on the way it is. The disparity between those that have and those that want to have is getting greater all the time.”
Andy Sommerville, Director at Search Acumen, says:
“Today’s property transaction figures from HMRC demonstrate a return to more normal levels of activity in the housing market. Following on the heels of a busy December, January saw a dip in transactions of about 22%. This brings activity back to the levels we were seeing outside of the Stamp Duty Holiday periods. This normalisation from the enormous activity spikes that took place last year can be seen as a natural next step.
Activity in January was still comparatively elevated, with demand continuing to outstrip the supply of housing stock and pushing up prices. This is particularly true in hotspot areas which saw increased activity as a result of workers returning to cities and finding new flats and accommodation to support their hybrid working styles.
There is a question mark on how demand will evolve in coming months, especially with interest rates on the rise and the cost of living crisis looming. While we can still expect consumers to re-evaluate their working and living choices over the next few months, the cost pressures may mean that we continue to see a dampening in demand in comparison to some of the dizzying heights we witnessed as a result of government stimuli.
In this context, we need to help buyers balance property demands with the upcoming cost pressures. To achieve this, innovation should continue to be put at the forefront of property professionals’ working practices. In some cases, digital ways of working are being mandated by the government, such as for AP1 submissions, which must be submitted digitally by November 2022. It is important to not only use technology to create a more seamless process and get ahead of these upcoming deadlines but also to proactively spot ways to disrupt existing working practices. While identifying opportunities to create efficiencies can be seen as a barrier to completing the daily to-do list, it has the potential to pay dividends –in terms of lightening workloads, helping buyers to achieve their next purchase and benefitting firms’ bottom line. We urge the entire sector to embrace a digital first approach that will better serve buyers in the new reality we are facing.”
