The latest HMRC Property Transactions data examining the monthly property transactions statistics suggests that the market is slowing, although industry predictions about what follows vary
The latest HMRC Property Transactions displayed a 3% decrease compared to the previous month in both the seasonally and non-seasonally adjusted estimate of UK residential transactions in December 2022.
By contrast, non-residential transactions increased by 9% (3% when seasonally adjusted).
The impact of increased mortgage rates is being felt
As transactions data is taken at date of completion of a house sale, typically lasting between two to four months- the impact of the recent increases in mortgage rates may now be being observed within these statistics.
Both seasonally and non-seasonally adjusted residential property transactions appear to be slightly depressed compared to the previous month, indicating a possible slowing of the housing market, although the evidence is limited to the current month.
Longstanding pandemic factors are a significant presence in the figures
With the obvious influence of pandemic restrictions and financial measures taken such as temporary reductions in stamp duty, many will not be surprised by a lack of significant growth in residential buying.
The levels of current monthly property transactions are higher than late 2019, before the coronavirus (COVID-19) pandemic. The number of residential property transactions in the year to date are similar to, but slightly lower than, those in 2021 to 2022.
Commercial property market activity will be driven by new legislation
Andy Sommerville, director at Search Acumen, the property data and insight provider, comments: “The final transaction data for 2022 echoed the trend we saw throughout the last quarter of the year, reflecting a cooling housing market, weighing heavy under the cost of living crisis.
“The recessionary period we are now in the midst of, alongside the higher borrowing rates on offer compared to this time last year, has certainly impacted people’s appetite to move. This can be seen in the data, which saw a 3% decrease in transaction volumes in December. Although transaction levels tend to seasonally decline at this time of year, it is a sensible assumption to expect to see this trajectory continue in 2023 as we settle into a sustained period of financial difficulty.
“In the commercial real estate sector, we know that with high inflation rates, rising cost of finance and higher exit yields, alongside trends such as falling office-based employment, will likely cause transaction volumes to remain lower than previous years.
“However, this may be offset by new environmental regulation adding unexpected momentum to the office sector. Set out by the Government to encourage energy efficiency in office buildings, this may force the need for companies to develop or refurbish existing spaces, or move to more efficient buildings altogether. This will continue to spark some movement in the sector, despite low demand for commercial property more generally.
The residential market will have to create its own momentum for change
“Looking ahead, for homebuyers who are still looking to move, they are now part of a vital group keeping the residential market moving. We know over a third of property sales fell through last year, peaking at over 52% of all transactions in November, a number that could be set to increase due to the upcoming HM Land Registry strike.
“Due to occur on 1 February, following disputes regarding pay, pensions, jobs, and redundancy terms, the strike action has the potential to even further delay transactions and exacerbate problems with homebuying being felt across the country. It is vital that we help the industry stay on its feet using technology as the catalyst for change.
“We calculated that the average legal firm stands to save 115 hours a month when making laborious tasks automated, while the sector as a whole stands to save over eight million hours each year through end-to-end digitisation.”
Nick Leeming, chairman of Jackson-Stops, commented on the latest HMRC Property Transactions figures: “It’s encouraging to see transaction levels hold year on year. Buyers have made the most of the quieter period to complete their transactions, clearing the way for a new wave of properties to enter the market in the Spring and provide an anticipated bump in instructions and buyer interest. Ahead of this, we have seen mortgage rates fall to their lowest point for three months, helping to ensure that borrowing remains accessible, and transactions can still go ahead in significant numbers up and down the country.
“With supply levels remaining steady as we move further into 2023, house prices remain largely insulated even if growth levels month on month soften. Buyers remain in the market and keen to go ahead in areas where supply is available, but where we are seeing a change is in the amount that they are willing to spend in order to proceed with a purchase. Buyers feel much more grounded in reality now with a long-term outlook, as we wave farewell to the frenzied pace of bidding wars seen six months ago.”
