Mortgages  

Property sales plummet to 9-year low

Property sales plummet to 9-year low

Property transactions fell by nearly half (48.4 per cent) in October, signalling the lowest house sales this month has seen in nine years.

HM Revenue & Customs’ provisional estimates show 85,090 residential property transactions took place last month on a non-seasonally adjusted basis, just 30 more transactions than October 2012’s total.

Having halved month-on-month, transactions last month are also expected to be 30 per cent lower than a year earlier, signalling a shift away from the highs seen in the past year.

Experts have put the “drastic”, “cliff edge” decline down to the full re-introduction of stamp duty land tax, which requires payment outright and hence impacts buyers’ affordability.

“We all knew that the market was going to slow, or even fall off a cliff, at some point,” said Richard Pike, sales director at mortgage solution provider Phoebus Software. “However, [this] is a pretty big cliff.”

Despite the figures’ provisional status, Pike said: “It is difficult to imagine that the confirmed figures will show much difference to those we are seeing.”

Looking at the figures, Anna Clare Harper, chief executive of property consultancy SPI Capital, said: “In short, a 10-year peak in transactions last month was followed by a 10-year low.”

Unsurprised by the sharp dip, Harper continued: “Stamp duty is a significant influence on affordability. Whilst buyers can borrow more from banks to pay more for housing, stamp duty has to be paid outright. For this reason, it can act as a catalyst for decisions to buy or not to buy.”

In October, the tax returned to its pre-pandemic thresholds, requiring buyers to pay it on properties with a value of more than £125,000, or in a first-time buyers’ case, on purchases totalling more than £300,000.

Between July 2020 and June 2021, these thresholds were moved, allowing buyers to avoid the tax on transactions up to £500,000.

Karen Noye, mortgage expert at Quilter, said the month on month drop off in property sales evidenced the rush to buy was heavily influenced by the government tax relief scheme.

“There has also been a fundamental change in what buyers want as people move out of cities to seek more space,” Noye continued. 

“This, coupled with fewer international buyers has already impacted transactions in built up areas, such as central London, and the end of the stamp duty holiday will have exacerbated the downward transaction trend.”

‘Overinflated’ house prices

Housing transactions typically drive house prices. In October, house prices were up 0.7 per cent, pushing the average price of a home in the UK above a quarter of a million pounds (£250,311) for the first time.

But experts warned they may well start to stutter, as inflation and potential interest rate rises could mean buyers begin to be more cautious in the months ahead.

Noye said: “While prices still seem to be on the up, the huge drop in property transactions may well begin to nudge overinflated house prices back down over the coming months.