Residential and non-residential property transactions fell in April.
Following a spike in property transactions in March, the latest HM Revenue & Customs (HMRC) Property Transaction data showed a return to the downward trend in transaction levels across both the residential and non-residential sector. The number of UK residential transactions in April 2023 was estimated at 67,220, around 32% lower than the same month of the previous year, and 29% lower than March 2023.
There was a 17% year-on-year decrease in the number of UK non-residential transactions. The April 2023 total of 8,870 was also 32% lower than the number recorded in the previous month. HMRC, in its latest monthly property transactions report, noted that the month-on-month fall in transactions from March to April appeared particularly large, partly due to the relative strength of March.
The number of transactions in March was high due to a combination of factors, including a larger number of working days relative to April and the final month for purchases to be completed under the government’s Help to Buy equity loan scheme.
Kevin Roberts, managing director at Legal & General Mortgage Services, said, “following the uptick in property transactions in March, today’s data similarly suggests that buyers and sellers are steadily returning to the market, although transaction figures no longer resemble the highs we saw during the pandemic, activity is still proving to be much more resilient than we had anticipated.”
Alex Lyle, director of estate agency Antony Roberts, added, "while April’s transaction figures are disappointing, the picture is not uniform with some properties selling better than others. The majority of the most desirable houses –£1.5 million-plus family homes – are going under offer within three weeks of marketing,” Lyle pointed out. “However, flats, in particular those compromised in some way, are struggling to achieve the prices we could have expected this time last year. One issue is how long everything is taking – it is hard to remember a time when deals took so long to progress from agreed to exchange of contracts. As well as chains being more protracted, many solicitors are finding themselves working at capacity.”
Nicky Stevenson, managing director at estate agent group Fine & Country, said, "the slowdown in the property market last autumn as a result of the mini budget has fed into April’s sales figures. Due to the time it takes to complete on a property, many of these sales will have been agreed just as mortgage rates spiked, resulting in some transactions stalling due to affordability issues,” Stevenson explained. “We will see sales numbers increase soon, as property market activity has grown in recent months as mortgage rates have stabilised. Mortgage approvals, an indicator of future transactions, have also been ticking up. This boost in activity is partly down to increased buyer confidence, alongside an increasing pipeline of new homes going up for sale, which is giving buyers much more choice and feeding their enthusiasm to begin their property search.”
Simon Webb, managing director of capital markets and finance at LiveMore, however, believes that property transactions will continue to fall. “The slowdown is likely to continue as uncertainty in the economy, along with the high cost-of-living and rising mortgage rates, will put some people off moving home,” he said. “Until inflation comes down to more palatable levels and bank base rate reduces, we expect 2023 to deliver a subdued housing market.”
House prices UK – Nationwide reveals the latest
Average house prices still 4% below their August 2022 peak. Annual house price growth dropped again in May, slipping back to -3.4% from -2.7% in April, the Nationwide Building Society has reported. May also saw a 0.1% month-on-month fall in house prices. Average house prices, at £260,736, remain 4% below their August 2022 peak.
Robert Gardner, chief economist at Nationwide Building Society, said "the softening of annual house price growth largely reflects base effects with prices broadly flat over the month after taking account of seasonal effects. Recent Bank of England data had shown some signs of recovery in housing market activity, although the number of mortgages approved for house purchase in March was still around 20% below pre-pandemic levels,” Gardner stated, commenting on the figures in the latest Nationwide House Price Index. Moreover, headwinds to the housing market look set to strengthen in the near term. While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected. As a result, investors’ expectations for the future path of bank rate increased noticeably in late May, suggesting it could peak at around 5.5%, well above the 4.5% peak that was priced in around late March. Furthermore, rates are also projected to remain higher for longer.”
Gardner pointed out that "if maintained, this would likely exert renewed upward pressure on mortgage rates, which had been trending down after spiking in the wake of the mini budget in September last year. Nevertheless, in our view, a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape,” he said. “While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once bank rate peaks.”
Rohit Kohli, director at Romsey-based mortgage broker The Mortgage Stop, said "the rest of 2023 now looks uncertain and that the long wait until the next Bank of England interest rate meeting “could fuel speculation and promote caution among prospective buyers. Increased borrowing costs amid the current upheaval in the mortgage market could discourage potential buyers, slowing the market further,” he explained. “If the base rate rises to 5% or even 5.5%, the impact on sentiment and demand could be significant. Higher costs could reduce affordability, potentially suppressing activity and lowering house prices. This could also increase arrears and repossessions as homeowners shift onto higher payments.”
Chris Hodgkinson, managing director at property purchasing specialist House Buyer Bureau, meanwhile, remarked that, "market performance so far this year had been inconsistent, and that this uncertainty is proving problematic for the nation’s homebuyers and sellers who continue to tussle when negotiating on price. The consequence of this back and forth is a more protracted transaction timeline and a greater threat of sales falling through,” he said. “That said, buyer activity is building and while the current landscape is certainly more difficult, those who are able to negotiate it are still securing a good price for their home.”
James Briggs, head of personal finance intermediary sales at specialist lender at Together, said that "in the coming weeks, hopeful buyers and existing borrowers would continue to keep a close eye on the wider UK economic performance and impact of cost-of-living to the property market. Working with a specialist lender who can advocate for multiple and flexible routes on to the property ladder, including Right to Buy mortgages and shared ownership in the high-cost environment is certainly worth considering.”
UK house prices: Warning over 'sensitive' market with fresh turbulence in just weeks
The housing market remains “sensitive” as a major development could bring fresh turbulence in just a few weeks, an expert has suggested. Richard Donnell, the executive director of research at Zoopla, warned that, "rising mortgage rates and the wider economic outlook could have a profound impact on the housing market. Sellers shouldn’t get carried away by more positive data on the housing market and need to price their homes realistically if they are serious about moving home in 2023. Homebuyers remain price sensitive with one eye firmly on the outlook for the economy, the cost of living and the trajectory of mortgage rates, which appear likely to edge higher in the coming weeks.”
Mortgage costs have been rising as higher than expected inflation figures force the Bank of England to keep hiking interest rates. The inflation rate in the United Kingdom dipped to 8.7% in April, down from 10.1% in March. However, the figure remains at a 31-year-high for April and could lead to the Bank of England raising interest rates to nearly 5% .
An increase, likely up by 0.25% to 4.75%, would mark the Bank’s 13th consecutive hike.
The base interest rate was as low as 0.1% in late 2020 and early 2021. The figure steadily rose with increments of 0.25% to 4.25% in March. However, Prime Minister Rishi Sunak has staked his premiership on curbing inflation, Sunak outlined halving inflation to around 5% as his number one objective when he unveiled his top five priorities earlier this year.
Despite Donnell’s pessimistic prediction, Zoopla also revealed that more prospective house sellers are returning to the UK’s property market. The development has pushed agreed home sales to their highest point on the year. House prices have also fallen by 1.3% nationally over the past six months.
However, the speed of price falls has been steadily decreasing as buyer confidence slowly starts to improve.