HMRC’s December residential transaction figures indicate a steadying market as the annual number of sales exceeds 1 million for the first time in a decade.
Figures show that the provisional non-seasonally adjusted estimate for December 2021 sales transactions is 113,470, 14.6% lower than December 2020 and 11.8% higher than November 2021.
Although sale volumes for December were not as high as initially predicted, residential transactions did increase for the second month in a row, signalling a steady market throughout 2022 and higher activity than pre-pandemic levels.
Andy Sommerville, Director at Search Acumen, commented:
“December’s transactions figures mark a solid end to what was an extremely fast paced and enormously busy 12 months. While transactions in December rose month-on-month, the rate of growth was slower which was expected for the final month of the year as people’s minds turned to Christmas and Covid-19 reared its head again.
2022 may be a comparatively quieter year in terms of transactions, but there will be no room for property lawyers to grow complacent. While the past two years have shown that predictions are not always easy to make, the headwinds going into 2022 point to a potentially less frenetic property market, but still operating at higher levels compared to the pre-pandemic period.”
Supply shortage will have a knock-on effect however, and due to the 2-3 month lag between sale agreements and completions, transaction figures are expected to dip as we progress through 2022.
Factors such as inflation and rising house prices, which according to latest ONS data have risen by £25,000 in a year, may also pose questions around affordability for borrowers and lenders. HSBC is already reportedly introducing stricter affordability tests for mortgage products due to the effects of inflation.
Richard Pike, Phoebus Software sales and marketing director, said:
“With the potential for another interest rate rise from the Bank of England in a couple of weeks there will be plenty of people looking to quickly secure themselves a decent longer term fixed rate. As we saw at the beginning of January, when NatWest reduced its rates, there are still deals to be had and now that inflation has passed the 5% mark, the question of affordability will be top of mind for anyone thinking of moving house. For lenders the same question will be as important as ever as house prices, according to the ONS this week, continue to rise unabated.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, commented:
“Property sales continued to bounce back in December, but there’s every chance this is a temporary blip. Over the previous two months, sales have been recovering from the lows of October, climbing slightly above the kind of levels we usually see in December. However, the lag in these figures means they reflect sentiment before talk of rate rises started in earnest, so this bounce isn’t guaranteed to take off.
Agreed sales have been dropping partly as a result of the property drought, with the number of properties coming to market falling for the last nine months of 2021. The shortage of houses doesn’t just make it harder to buy, it’s also pushing prices up, with early indications from the commercial indices that prices hit a record high in December. It puts buyers in the miserable position of having to pay a huge premium for a home that they’ve had to settle for, which is going to put some of them off.
Interest rates will be playing their part too, with weeks of speculation, a rise in December, and yet more talk of rises to come in the next few weeks or months. Any rise in mortgage rates would be a rise from a very low base, and there will still be some very attractive mortgage deals around. However, as we saw from the last few months of the stamp duty holiday, sometimes the idea of a change affects people’s buying decisions far more than the practical impact of the change itself. Back in September, people were racing for a deadline that, at most, would save them £2,500. So there’s a risk that a rise to an interest rate as low as 0.5% could make people think twice about stretching themselves to a more expensive property.”
