UK residential property transactions dropped by 18 per cent in February compared to the same time last year, but brokers said the market is looking better than the data would suggest.
The latest statistics from HM Revenue and Customs released today (March 21) showed that while there was a significant drop in transactions compared to February 2022, on a month-by-month basis, UK residential transactions were up 4 per cent.
HMRC has attributed the annual change to the turmoil seen in the mortgage market in the second half of last year when mortgage interest rates were pushed up following the “mini” Budget.
After peaking at around 6 per cent, mortgage interest rates are now sitting generally around the 4 per cent mark, with many borrowers facing the double whammy of increased monthly mortgage payments and wider economic inflation.
The biggest reason for the fall in transactions is increased costs — Luke Thompson, PAB Wealth ManagementHMRC noted that UK residential transactions have generally been stable in recent months, but that we are now starting to see a decline in the numbers of transactions.
Residential transactions are marginally lower than pre-coronavirus, with the provisional non-seasonally adjusted estimate in February 2023 sitting at 76,920 compared to 82,830 in February 2020.
HMRC has advised caution when interpreting estimates from their latest monthly figures as they are based on incomplete data and will be updated as property related taxes are finalised.
On the ground
With this in mind, mortgage brokers have said the latest statistics are not fully reflective of what they have been experiencing since Christmas.
“Since January, rates have eased slightly and this has made things slightly more competitive but I think buyers are having to get used to the fact that the age of ultra-low interest rates is almost certainly behind us,” Luke Thompson of PAB Wealth Management said.
“The biggest reason for the fall in transactions is increased costs. In October and November, we had purchasers pulling out of deals on a daily basis.
“This has abated somewhat as buyers have become used to higher interest rates but it has meant that sellers aren't achieving the higher sale prices they would have been hoping for in mid-2022."
Likewise, others in the sector said they have seen business return to steady levels following a decline in the final quarter of 2022.
“Though these figures show transaction levels are down nearly a fifth compared to a year ago, as a firm of solicitors offering residential conveyancing to clients, we have seen a steady return to 2022 levels of activity following a decline after the mini-Budget through to December, our lowest level of new instructions for some time,” Paul Currie, partner at DFA Law said.
This week (March 23), the Bank of England’s monetary policy committee is scheduled to meet and will decide on whether to increase the base rate further which will have a knock on impact for mortgage rates and property transactions.
Given the recent volatility in the global banking sector, most notably the collapse of Silicon Valley Bank and the UBS takeover of Credit Suisse, mortgage professionals are unsure of what to expect from the Bank of England’s base rate decision.
Earlier this month, Bank of England governor Andrew Bailey signalled that the base rate may have reached a stable point and said there was no evidence to suggest a further increase was needed.
jane.matthews@ft.com
