According to the latest figures from HMRC, seasonally adjusted estimates of UK residential transactions were around 28 per cent lower than October last year and 52 per cent down from September this year.
The report said that the low level of transactions could be largely explained by around a 54 per cent decrease in England compared to September due to the lifting of the stamp duty holiday. It is also around a third lower than October last year.
Figures suggest residential transactions completed in Scotland and Wales in October did not reflect the level of forestalling in England and Northern Ireland as the changes they made to Land and Buildings Transaction Tax and Land Transaction Tax came to an end on 31 March 2021 and 30 June 2021.
It added that the varying national and regional lockdowns in the UK between January and July this year may have impacted property transactions in the UK.
Overall, it said that after year-on-year decreases in April and May 2020 around half UK residential transactions increased and peaked in March, June and September 2021.
It also found that provisional estimates for the 2021 to 2022 financial year-to-date have been the highest for the past 10 years at 842,250.
Property market outlook dependent on Bank of England rate rise
John Phillips, national operations director at Just Mortgages, said that after an erratic 18 months with record spikes in activity the property market should settle, and transactions should level out.
He explained: “As the dust settles from the stamp duty holiday, the October figures gave us a clearer picture of the property market. The story they tell is an encouraging one, as despite the return of stamp duty, there is still strong demand for property.
“Lenders appear to still be confident in the resilience of the market and aren’t predicting a drop in prices any time soon. This is clearly demonstrated by the availability of 95 per cent loan to value (LTV) mortgages, which have returned in force over the past few months. This should hopefully bring more first-time buyers to the market, as they are mainly exempt from stamp duty.”
Richard Pike, Phoebus Software sales and marketing director, said the market was expected to slow or fall off a cliff, but the latest figures were a “pretty big cliff”.
He said: “The one thing that may give the market a boost in the last few weeks of the year is the Bank of England’s reluctance to increase interest rates this side of Christmas, despite exceeding the predicted four per cent inflation rate. While this is the case, and as many two and five-year fixes come to an end, there will be many looking to tie themselves into a new fixed-rate deal before the inevitable interest rate rise in the new year.”
This was echoed by Mark Harris, chief executive of SPF Private Clients, who said that markets were pricing in an interest rate rise in December, but the Bank of England was hinting that the situation was “finely balanced” with slowing growth and the energy supply squeeze, which would be hit negatively by a rate rise.
Harris added: “In the meantime, the dynamic nature of mortgage pricing has paused a little as lenders take stock. Not all mortgages are becoming more expensive – generally, rates on lower loan-to-value mortgages have been rising but on higher LTVs they have been falling. A 95 per cent LTV two-year fix is cheaper now than it was two years ago, making life easier for first-time buyers, who are so important to the overall health of the housing market.”
Anna Clare Harper, chief executive of property consultancy SPI Capital, said that the fact a 10-year peak had been followed by a 10-year low was “unsurprising” due to stamp duty’s impact on affordability.
She explained: “As for what is next: we can expect a general slowdown in housing transactions, but a significant reduction in house prices is unlikely. This is because the cost of buying a new property is now higher, and the cost of holding on to a property remains low due to low interest rates and wide availability of low cost, fixed rate mortgages.”
She said: “Perhaps the biggest problem the housing market faces going forward is the shortage of available stock, which means that even as housing transactions fall, prices are likely to remain strong.”
Calls for stamp duty reform
Joshua Elash, director of property lender MT Finance, said that the monthly decrease in residential transactions was “dramatic” and reaffirmed arguments for stamp duty reform.
He said: “The argument for either reworking or scrapping stamp duty all together has never been louder or clearer. Stamp duty is the tax holding back a property market which would benefit now more than ever from greater levels of fluidity.
“As inflation begins to bite, a continued lack of supply in the market will translate into higher property values. While this is great for existing property owners, it will exacerbate the issues first-time buyers have experienced in getting on the ladder.”
He added: “Getting rid of stamp duty will encourage more transactional volume, increase the supply of property in the market, and accordingly ease some of the inflationary pressure on real asset values. It’s a no brainer at this point.”