The number of UK residential property transactions dipped by 3% between October and September, new figures released by HM Revenue & Customs (HMRC) has revealed.
The provisional non-seasonally adjusted estimate of UK residential transactions in October 2022 is 110,850, some 3% lower than September 2022 – a significant drop in deals month-on-month.
It’s important to note that, while a 3% drop is indeed a stark reflection of the economic headwinds engulfing the UK during the second half of 2022, transactions still remain above pre-pandemic levels. For example, October 2022’s estimate is some 3.5% higher than October 2019’s 107,100 transactions.
Yet looking ahead, there’s a strong chance transactions could dip well beneath this level, with recent analysis from Savills suggesting conveyancers should prepare for a 28% nosedive in transactions during 2023.
This is not, however, guaranteed. Nick Leeming, Chairman of Jackson-Stops, said the market is “underpinned by a fundamental supply crisis, keeping demand buoyed and making the fear of a cliff-edge fall highly unlikely”, adding:
“With wider fiscal markets now stabilising from Trussonomics, mortgage rates are also falling which may take the breaks off some peoples planned home moves.”
Leeming said the shift to the new normal will be a “slow burner”:
“For anyone reliant on borrowing to fund their house purchase, the pressure to complete might feel twice as high, and transactional delays twice as frustrating, but the message is that mortgage rates should continue to edge downwards in the coming months as more products are released to market.”
Andy Sommerville, Director at Search Acumen, credited part of the ability to maintain a somewhat steady level of transactions to conveyancers’ efforts to get deals over the line prior to mortgage offer expiry – in spite of the “increasingly high volume and complex caseloads”. He added:
“The continuation of stamp duty cuts until March 2025 announced in last weeks Autumn Statement will enable some buyers to join the property ladder for the first time, keeping the bottom end of the market fluid.”
There was, however, a caveat:
“As part of austerity 2.0, a new focus on public sector efficiency is likely to translate to cutbacks, and coupled with the threats of strikes by HM Land Registry staff, more clouds of doubt have been cast over the industry’s ability to keep up with demand.”
Danny Belton, Head of Lender Relationships, Legal & General Mortgage Club, said the figures show the mortgage market “continues to sail relatively steadily through choppy waters”, continuing:
“Demand and activity both remain relatively high despite economic stresses, while Moneyfacts data also shows that interest rates dropped across the board last week, particularly for three-year fixes. This should go some way to encourage buyers, as will the recommitment to stamp duty tax cuts in the Autumn Budget last week.”
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, was less optimistic, suggesting October’s drop is simply the “calm before the storm”:
“Home completions sailed a steady course through October, but the looming storm is likely to sink sales. October saw carnage unleashed in the mortgage market, but buyers, with much lower mortgages already in their back pocket, continued to plough on. It means October sales were still slightly above pre-pandemic levels, but this is the relative calm before the storm.”
Coles went on to discuss the “pain” set to arrive in the coming months:
“It’s those who had yet to dip their toe into the market who have been sent running for the hills. We know buyer demand continued to fall, and that in the aftermath of the mini-budget in September and October, it fell through the floor. The RICS Residential Market Report showed house price growth ground to a halt, sales plummeted, and estate agents weren’t confident they would pick up any time soon. It’s not a huge shock. Buyers faced the horror of mortgage rates spiking overnight, and while the average two-year fix has since come down to 6.21%, according to Moneyfacts, it’s still a different world for buyers.”
This, says Coles, will leave transactions sluggish “for the duration of the recession” – not least in the coming winter.
