It shows the decline in general market conditions in recent months.
Transaction levels across both the residential and non-residential sector continued to fall in May, according to the latest HM Revenue & Customs (HMRC) Property Transaction data.
The number of UK residential transactions in May 2023 was 74,360, around 25% lower than the same month of the previous year and 10% higher than April 2023. For non-residential transactions, the number decreased by 12% year-on-year, but the April 2023 total of 9,120 was 4% higher than the number recorded in the previous month.
HMRC, in its latest monthly property transactions report, said that the large falls in transactions relative to last year for both residential and non-residential transactions were not only due to the higher number of bank holidays in May 2023, but also represented the decline in general market conditions in recent months.
Ben Waugh, managing director at later life lender more2life said “market turbulence and swap rate volatility is no doubt having an impact on consumer confidence and capacity to buy, as shown by today’s dip in seasonally adjusted transaction levels. Challenging as the current climate may be, we should remember the stability the market has demonstrated in the last six months – defying earlier predictions of a recession – and the increasing amount of support that is available for consumers. Most homeowners in the UK had on their minds the recent base rate increase to 5% and inflation which continues to be stubbornly high at 8.7%. While those who need to sell or buy property will no doubt find a way, others may be tempted to wait until they are more confident about what to expect next,” he said. “Unfortunately, there is no easy solution nor crystal ball, so each buyer ultimately needs to consider what works for them and their individual circumstances over what time frame.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, remarked that "the downwards trend in transaction numbers continued partly due to the strong numbers prevailing at this time last year. Transactions always provide a more accurate reflection of market health than property prices,” he commented. “Mortgage upheaval and inflation concerns have meant fewer buyers and more protracted negotiations, which is resulting in fewer transactions. However, buyers and sellers still seem determined, where finances permit, to ensure sales proceed even though they are taking their time over it.”
Vikki Jefferies, propositions director at mortgage network PRIMIS, said that "while the number of property transactions were somewhat subdued, UK residential figures continue to remain in line with pre-pandemic levels, highlighting the market’s resiliency despite recent significant economic headwinds. There is still appetite to lend and plenty of activity in the pipeline, particularly in the remortgaging and specialist lending sectors,” Jefferies pointed out. “In order to navigate the ever-evolving product market, brokers should look to tap into sources of training and support, such as mortgage networks, which will allow them to best support consumers during this challenging period.”
Britain Plummets into the Bottom 10 in the Global House Price Growth Rankings, as Mortgage Mayhem Takes its Toll
The UK has plummeted from 26th to 47th place in global rankings for house price growth over the past year, Knight Frank's latest Global House Price Index reveals.
Year-on-year, property prices in the UK fell by 3.1%, Knight Frank says, while in the last six months they have fallen by 5.6%t, it added. The UK's spot in the global property house price growth rankings is now only four places higher than Ukraine, which rests in 52nd place, having seen property prices fall 7.8% over the last year amid the ongoing war.
Sluggish: Property prices in 56 countries rose at the slowest pace since 2015 in the last year, Knight Frank said
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Property prices in the UK have fallen while inflation remains high and many households battle with higher mortgage rates and repayments. The average interest rate for a five-year fixed mortgage has topped 6 per cent for the first time since the mini-Budget fallout in November, according to data from Moneyfacts this week.
Property prices in 56 countries around the world rose at the slowest pace since 2015 in the last year, Knight Frank's rankings reveal. Annual global house price inflation slowed to 3.6% in the 12 months to the first quarter of 2023, down from growth of 5.7%. However, while global house prices contracted 0.6% in the final three months of 2022, they rose by 1.5% in the first three months of 2023.
UK woes: The UK's ranking has slipped from 26th to 47th place in the property price growth rankings
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During the past year, South Korea, New Zealand, Hong Kong and Sweden saw property prices fall by 15.7%, 13%, 10.3% and 8.8% respectively. New Zealand saw one of the biggest falls in prices globally in the last year. While house prices in New Zealand are likely to fall further, the speed and depth of the correction suggest that an uptick in both demand and eventually prices will come back up earlier than in many other developed markets, according to Knight Frank.
Australia and Denmark also fared worse than the UK in the rankings, coming in 48th and 49th place respectively, with both seeing house prices fall over 5% annually, Knight Frank added. At the other end of the spectrum, Turkey led the rankings again last quarter, but its property price growth of 132.8% in the year to March 2023 is largely a consequence of 'rampant inflation', Knight Frank said.
It added a 22% quarterly rise in house prices there in Q1 suggests there is more to come this year. The US came in at 39th place in the rankings, having seen property prices rise by 0.7% in the last year, but fall by 1.1% on a six-month comparative. Spain, an ever-popular destination for Britons looking to buy a property abroad, saw house prices rise over 3% in the last year, leaving the country resting in 29th place in Knight Frank's latest league table.
Eastern and south-eastern European countries dominated the top of the rankings with North Macedonia, Croatia and Hungary all showing strong annual growth of over 15%.
Singapore was the top performer in the Asia-Pacific region, with 11.3% annual growth.
Knight Frank said "recent changes to tax policy in Singapore have mainly targeted overseas buyers to try to cool rising prices, though there were enough domestic buyers to push prices to new highs. The Urban Redevelopment Authority is releasing new sites for development as it seeks to increase housing supply."
Looking ahead, Knight Frank said "'risks' remain for many global property markets, with the biggest being high inflation. Headline rates are falling in most locations, but core inflation remains stubbornly high in the UK, the US and Europe. While we might be closing in on peak interest rates, the downward pivot may be further away than anticipated even a month or so ago. The first cuts in policy rates may be delayed to the second half of 2024 for several key markets, which would lower transactions and market liquidity for 12-months or more."
Liam Bailey, global head of research at Knight Frank, said "while the latest data reveals a substantial slowdown in annual price growth, quarterly growth improved. Global house prices contracted 0.6 per cent in the final three months of 2022 yet saw a 1.5% rise in the first three months of 2023. On its own, this reversal doesn’t confirm that global markets are set to improve – rather, it does highlight that tight supply, limited new housing construction and strong household formation are acting to underpin prices in many markets."
Buyers can take advantage of falling house prices
Falling property prices spells bad news for sellers, but buyers can make the most of the situation, so long as they can cope with higher mortgage rates.
Speaking to This is Money, property buying agent Alex Decmar, said "the harsh reality is that interest rates - and the threat of them going up - have played a huge part in the drop in house prices as demand has decreased. There is a small window to buy really well, and buyers who can afford to buy should. The UK has always been a nation obsessed by home ownership and I can’t see that changing in the long run. I think in the short term, people will need to adjust to interest rates and not expect the cheap money that was historically being thrown at homebuyers."
Decmar thinks that prospective buyers should try to take advantage of lower property prices while they can. He is seeing deals compete well below market levels seen at the same point last year. He said "in terms of prospective buyers, I’m finding that the deals I’ve agreed for clients I’m representing over the last six months are considerably below the market level just a year prior. I believe in the next 18-24 months the market will bounce back and people buying now will be sitting extremely comfortably assuming they can put up with the short term discomfort. There is a small window to buy really well and buyers who can afford to buy should."