Residential property transaction numbers drop again

Property transactions are only likely to get worse before they get better, says one expert

Residential property transaction numbers drop again

The number of UK residential property transactions fell again in October, the latest HM Revenue & Customs (HMRC) Property Transaction report has revealed.

Residential transactions in the UK totalled 90,920 last month, which is 17% lower than last year and 2% lower than September 2023.

“Housing transactions are down, which is unsurprising,” said Anna Clare Harper, chief executive at sustainable investment adviser GreenResi, commenting on the latest HMRC monthly property transactions report.   

“Firstly, we are still coming down from a bubble caused by COVID and Stamp Duty reductions, which created double-digit house price growth for much of the past three years. Secondly, the higher base rate is designed to cool demand, and therefore, pricing in the economy, and it is working to plan.

“Sentiment is subdued across the property market. However, for investors it’s a time of opportunity since rental demand has never been stronger, and it is a good time to negotiate on purchase price.”

For Chris Little, chief revenue officer at finova, property transactions are only likely to get worse before they get better, unless there is a marked fall in mortgage rates.

Stubborn inflation threatens to extend the UK’s cost-of-living crisis into 2024, and budgets are still squeezed as many borrowers have dipped into their savings to make ends meet,” Little pointed out. “Stabilising swap rates do suggest that mortgage rates could eventually be on a steady decline, but this turning point is still a few months away.

“All eyes will now be on the last few months of the year, and whether the data will show the usual end-of-year flurry of activity or a more probable winter slump prompted by affordability concerns.”

Gareth Lewis, managing director at property lender MT Finance, said that while transactions have dipped, volumes haven’t fallen off a cliff with people still buying and selling.

“The numbers are what you would expect given the higher interest rate environment, which creates affordability issues, but borrowers are gradually getting used to this,” he added. “The stabilisation of the interest rate environment will encourage more people into the market. Better mortgage products at sub-5% are also helpful, while lenders need to think outside the box in order to support borrowers as best as they can.

“As we move into a better environment for interest rates and consumer confidence, a government incentive in the new year to get people to transact would be a further move in the right direction.”

Terry Woodley, managing director of Development Finance at Shawbrook, is hopeful that property transactions would trend upwards as 2024 approaches.

“Another month of muted transaction figures for residential property, likely the result of sustained high interest rates and economic uncertainty,” he said. “However, a positive month for commercial property as non-residential transactions see annual and monthly growth.”

Non-residential transactions, the HMRC reported, hit 10,280 in October 2023, around 5% higher than last year’s figure and also 5% higher than the previous month’s.

“Hopefully, the government’s Autumn Statement will inject some positivity into the market, and developers will be buoyed by the positive changes to planning processes and support for new construction,” Woodley said.

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