Is this a sign of a housing market slowdown?
UK residential transactions totalled 96,290 in June, down 55.1% when compared with last year and 3.1% lower than the previous month, the latest HMRC Property Transaction data showed.
HMRC also reported that the number of non-residential transactions was 8,850 in June 2022, around 24.3% lower than the previous year and 9.5% lower than the previous month.
While the drop in figures annually is quite significant, Ross Boyd, founder of mortgage comparison platform Dashly.com, pointed out that “comparing June 2022 to June 2021 is almost worthless given the impact of the stamp duty holiday on transactions.”
“June 2022 was inevitably going to be lower,” he said. “The drop-off compared to May is a more accurate gauge of where the market is headed, as soaring inflation and rising interest rates suck confidence out of the market.”
“Transactions are down significantly compared to June 2021 as last year’s data was skewed by the stamp duty holiday,” Andrew Montlake, managing director of mortgage broker Coreco, said, almost echoing Boyd’s statement.
“The slowdown in transactions compared to May this year is likely to be a sign of things to come as people become increasingly cautious as rates rise and the cost-of-living crisis bites. However, for now at least, the jobs market remains strong and that will ensure transactions don’t go off a cliff.”
Read more: Britain’s red-hot housing market about to cool?
Stuart Wilson, corporate marketing director of more2life, commented that the latest figures only show that property transactions are slowly starting to settle after a busy start to the year.
“Supply and demand issues have contributed to a competitive market with high house prices making the first step on to the property ladder harder and harder for first time buyers to reach,” he added.
Simon Webb, managing director of capital markets and finance at LiveMore, said the 3.1% monthly drop in housing transactions in June could be the “start of a summer lull.”
“With an uncertain economic environment ahead as the cost-of-living continues to rise along with interest rates, people may put their house buying plans on hold,” Webb added. “However, we are seeing house price growth slow down so affordability may still be in reach for potential buyers.
“This year has been a bit up and down on a monthly basis for housing transactions, but on a seasonally adjusted basis, they are relatively steady and not dissimilar to pre-pandemic levels.”
HMRC, in its report, said that when the UK housing market reopened after COVID-19 pandemic restrictions were removed, the number of residential property transactions increased. It noted significant peaks in March, June, and September last year due to temporarily increased nil rate bands for residential property taxes within different UK nations.
“The cost-of-living crisis is starting to bite with a dramatic fall in transactional activity in the property market compared with the same period last year, reflecting broader uncertainty in the economy as a whole, as well as the frenzy we witnessed last year when the stamp duty holiday was about to expire,” Joshua Elash, director of property lender MT Finance, said.
“We must be watchful as this trend could well lead to a more significant and swifter cooling of the housing market than expected which will translate into downward pressure on house prices as homeowners and investors alike focus on cost savings.”
Read more: UK housing market – is it about to hit the brakes?
Despite the dip in numbers, Emma Hollingworth, distribution director at MPowered Mortgages, said it’s encouraging to see transaction figures remain strong, albeit without the high level of activity that marked the beginning of 2021.
“However, while the transaction process is stabilising, buyer confidence is undoubtedly being dented by the cost-of-living crisis, as seen in the declining completion figures,” she pointed out.
“With house prices soaring for a sixth consecutive month and rates steadily climbing on a regular basis, speed is essential for those looking to buy a home. Among political and economic uncertainty, homebuyers should quickly and efficiently look to lock in mortgages before rates move again.”
