Impact of high interest rates and economic headwinds evident in latest HMRC figures
The number of both residential and non-residential property transactions in the UK fell annually in September, the latest HM Revenue & Customs (HMRC) Property Transaction report has revealed.
UK residential transactions totalled 92,600 last month, around 19% lower than the recorded number in September 2022.
For non-residential transactions, the number hit 10,060 in September 2023, some 6% lower than the previous year’s figure.
“Economic headwinds and the impact of high interest rates have contributed to a decrease in property transactions,” said Terry Woodley, managing director of development finance at Shawbrook, commenting on the latest HMRC monthly property transactions report. “Rising costs will continue to be a hurdle for developers, with two in five stating this as their main concern according to our latest research.
“As a result, 96% have had to make changes to their business strategy over the past year. Developers will be looking to complete projects quickly to mitigate the effects of increased costs and declining demand.”
Kay Westgarth, director of sales at Standard Life Home Finance, meanwhile, pointed out that while there was a reduced level of activity in the property market over the last couple of months in comparison to the norm, the broader economic trends are more positive.
“The decline in the rate of inflation, albeit minor, to 6.7% in September and the fact that average wage growth in the UK rose above inflation in August for the first time in almost two years, means that positive sentiment is starting to build in the market,” she said.
“However, reduced activity will mean that affordability will continue to be stretched, in particular for first-time buyers who are facing higher rates than their predecessors. With this in mind, many first-time buyers will be looking for support from family and friends to help boost their chances of getting onto the property ladder.”
For Mark Harris, chief executive of mortgage broker SPF Private Clients, transaction numbers dropped as borrowers reassessed what they could afford to pay amid higher interest rates and costs of living.
“Swap rates, which underpin the pricing of fixed rate mortgages, are trending down again after a recent blip,” Harris said. “While the direction of travel for new mortgage rates is generally downwards, we have seen a few lenders pull rates in the past few days, although this has been primarily in order to slow business.
“All eyes are on the Bank of England to see whether they hold rates again at the coming meeting and allow the dust to settle.”
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