HMRC property transaction data – industry reacts

"UK property market remains stuck in a deep freeze"

HMRC property transaction data – industry reacts

On a seasonally adjusted basis, the number of UK residential transactions in October 2023 was 82,910, which is 3% lower than the previous month and 21% lower annually, the latest HMRC Property Transaction data showed.

So, what are the views of the industry on this latest data and what is the outlook for the sector?

What is the outlook for the housing market?

Karen Noye (pictured), mortgage expert at Quilter, said the UK property market remains stuck in a deep freeze as weak demand caused by higher interest rates sees UK provisional seasonally adjusted residential transactions fall.

“Though mortgage rates are showing signs of stabilising, they are considerably higher than in previous years, and this is putting a real dampener on people’s enthusiasm for moving home or taking their first step on to the property ladder,” she said.

This stall in transactions, Noye added, shows people are still stuck in ‘wait and see’ mode, likely holding out in the hopes of a dip in house prices and lower mortgage costs.

Noye added that the summer months were remarkably subdued, and she expects the same as we head further into the winter months, which could be a cause for concern for house prices.

Though inflation continues to head in the right direction, Noye said the Bank of England is expected to hold rates higher for longer.

“House prices have remained resilient thus far, buoyed by the impacts of limited stock and high rental costs, but if interest rates remain high then more people may be forced to list their properties and we could see a surge in stock at a time of limited demand,” she said.

As we look ahead to 2024, should the Bank of England begin to feel confident enough to start reducing interest rates, Noye said, then we may also see confidence return to the market.

“The latest money and credit statistics from the Bank of England revealed a small uptick in the number of mortgage approvals, showing early signs that people might be returning to the property market,” Noye said.

However, should the number of property deals fall further in the coming months, she said, then prices could fall with them.

How is the mortgage market fairing?

Andy Sommerville, director at Search Acumen, said HMRC’s figures are indicative of the macro-economic conditions currently dictating the market.

“Despite some cause to be positive about the economic progress we have made through 2023, we have not turned the corner yet,” he said.

Sommerville added that the Office for Budget Responsibility (OBR) recently cut its growth outlook for the UK for 2024 and 2025.

“The governor of the Bank of England has reiterated that he does not see interest rates being cut for the foreseeable future and inflation remains double the Bank of England’s target rate meaning that, while we have made undoubted economic progress, people do not feel any better off yet and may not for some time,” he said.

Those macro-economic conditions, particularly the likelihood of very high borrowing costs for some time to come, Sommerville said, mean that sustained growth may still be a way off for both the residential and commercial markets.

In that context, house buyers, homeowners and investors across the residential and commercial property sectors, he added, will need to continue to be discerning in their asset selection and asset management decisions, looking at locations and asset classes with particular dynamics that enable them to outperform.  

Investors that succeed in a challenging market, Sommerville said, will be those that prioritise developing more intelligent data driven insights and leveraging technology to improve efficiency and decision making.

“The other thing that needs to happen to encourage growth is a better transaction process that facilitates more efficient and cheaper buying and selling of commercial and residential real estate,” he added.

Particularly in more challenging economic conditions, protracted transactions which are slowed down by lack of data, resources or manpower, he added, can derail a perfectly viable deal.

Sommerville believes we cannot be in that position going into 2024, especially with the range of technologies we have at our fingertips.

“It was positive to see the Chancellor confirm in his Autumn Statement an additional £3 million to digitise local council data, and develop new technological solutions to speed up residential transactions,” he said.

Moreover, Sommerville hopes that signals further investment from both industry and government to develop and integrate new technologies, particularly game-changing innovations like AI.

AI, he believes, could dramatically speed up transaction times, saving individuals and businesses a huge amount of time and money, and creating a sector that’s better primed for growth.

What are your views on the latest HMRC property transaction data? Let us know in the comment section below.