New data from HM Land Registry (HMLR) has revealed that residential property transactions climbed once again in July, bouncing back from the dips seen in June.
HMLR say the provisional non-seasonally adjusted estimate of UK residential transactions in July 2022 is 110,970, 32.9% higher than July 2021 and 7.2% higher than June 2022.
This rise comes against a backdrop of economic uncertainty and rampant inflation, as well as consecutive interest rate hikes, giving the impression that the market – and the demand for British bricks and mortar – is irrepressible.
HMLR did, however, stress that the figures “should be treated with caution”. As a result of the SDLT holiday threshold being reduced on 1st July 2022, there were “substantially higher transactions in June 2021 [which] resulted in un-seasonally low amounts in July 2021, in turn inflating the rate of year-on-year increase when compared to July 2022”.
Despite this, July 2022’s transactions are also well above pre-pandemic levels – the non-seasonally adjusted estimate of 110,970 is 5.9% higher than the 104,780 seen in July 2019.
Andy Sommerville, Director at Search Acumen, said the figures “show signs of a new normal” for property transaction volumes. He said:
“Although the heat of the post-pandemic property rush has burnt out, we are left with a strong residual market as families grow, downsizers relocate, and employment remains buoyant. This formula has ensured the wheels of the market have kept turning at a steady pace throughout July.
Despite the cost-of-living crisis set to weigh heavily on consumer finances, the fact that property transactions are levelling out to steadier numbers month-on-month may be indicative of greater supply allowing for more potential buyers to enter the market.
As homebuyers race to lock-in better mortgage rates while still available, we might also see a slew of properties come to market as sellers look to take advantage before house prices drop too far. An uptick in supply may not translate to fewer transactions, meaning it is entirely possible to see an extended period of strong transactional activity this autumn despite economic headwinds. These competing dynamics may push and pull the market in different directions and offset each other to some degree. Meanwhile, many caseloads remain victim to stifling backlogs and inefficiencies, keeping conveyancers on their toes.”
Sommerville added that this could lead to a “turbulent” time for conveyancers:
“All of that translates into a turbulent time for the conveyancing market with law firms needing to drive efficiencies to cope with increasingly complex caseloads and protect themselves against the prospect of a slowing market in the coming months, with inflation rates now predicted by some to go as high as 18%.”
Richard Pike, chief sales and marketing officer at Phoebus Software, said:
“Looking at the non-seasonally adjusted figures in July it is no surprise that the number of transactions in July is higher than in July 2021, given that the SDLT holiday came to an end in June 2021. However, we may have expected to see the figures falling in comparison to June this year when interest rates are rising and inflation is raging. To discover that this was not the case and that figures are ‘broadly’ in line with previous transactions in July is heartening. It shows that there is still an appetite to move, buy and sell and that the effect of rising mortgage rates is not the deterrent we might have expected.
Nonetheless, there are many factors that can still affect the housing market and, as reported last week by the ONS, with real wages shrinking when held up to inflation, it could be that the appetite we have been seeing is curbed. Affordability will be a defining factor and although lenders have more freedom since the affordability regulations were relaxed, common sense must prevail.”
Despite this optimism, Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, urged caution:
“House sales held up in July, thanks to the usual bumper summer season. However, this is a small detour for the market, rather than a change of direction. So as the summer fades, there’s every chance that the busy property market will do so too. The market tends to fluctuate, and boom in summer, but if you look at overall trends, sales have been gradually falling since the start of the year.
July saw almost 111,000 people get the keys to their new home, with sales only slightly below the 2022 peak in March. This is particularly impressive given that homes for sale have been so thin on the ground.
However, an awful lot of these sales will have been agreed in March and April, before we were hit by the full impact of the cost-of-living crisis. By the time we reached the summer, the market drained of available property and buyers evaporated, as sky-high energy costs, runaway inflation, rising rates and concerns that worse could be on the way sapped confidence from the market.
The number of properties for sale has fallen again in the months since, and buyers are thinner on the ground too. The RICS residential market survey show new buyer numbers have been falling since May. They also show that existing buyers are increasingly sensitive to wider market forces, so more sales are falling through.
We don’t expect a straight line downwards, because the property market isn’t full of mathematicians making clever calculations – it consists of humans with their own individual circumstances and motivations. However, we do expect the market to keep trending downward as we head into the autumn.”
Simon McCulloch, Chief Commercial & Growth Officer at Smoov, followed suit:
“It seems the traditional summer slowdown has not had an impact on today’s HMRC figures. However, a year-on-year comparison should be treated with caution as the stamp duty holiday was reduced from £500,000 to £250,000 on 1 July 2021, hence what has likely caused these figures to appear nearly 40% higher. However, on a monthly basis, transactions increased by 3.2%. Transaction volumes remain healthy, yet the big unknown is around how affordability constraints might impact property transaction volumes going forward. While supply remains constrained, it is possible that house prices will continue to defy gravity, albeit, perhaps, growing at a slower rate, despite affordability challenges. The next few months of housing data will bring us clearer answers.”
