UK housing market remains ‘steady’ despite economic uncertainty

24-10-2022

Residential property transactions dropped sharply last month the latest figures show, and yet there is plenty of room for optimism.

According to HMRC, transactions fell by 37% year-on-year in September to 103,930. But this largely reflects the fact that buyers rushed to complete transactions last year before the final phase of the stamp duty holiday ended on 30 September 2021.

Compared to 2019 when market conditions were more normal and 99,570 transactions were completed, activity for this year was 3.9% higher on a seasonally adjusted basis.

Iain McKenzie, CEO of The Guild of Property Professionals, said: “With September rocked by political turmoil and national mourning for the Queen, we might have expected today’s figures to show a greater slowdown in sales.

“Year-on-year sales may suggest that the market is cooling down, but it’s important to take these figures with a pinch of salt. The stamp duty holiday was winding down at the end of September 2021, causing a mad rush to get on the property ladder.

“While stocks are starting to increase, we are still seeing a supply shortage, with estate agents across the UK still seeing high demand for limited stock.”

Nick Leeming, Chairman of Jackson-Stops, commented: “The housing market remains steady. Transaction levels continue to hold firm month on month as the backlog of transactions and completions only builds, having enjoyed such an active market since the summer of 2020.

“Any annual comparisons will of course paint a different picture but it’s important to keep in mind that the levels of activity seen in late 2020 and throughout 2021 were the exception not the rule. House prices are also continuing to benefit from an inflow of committed buyers and sellers who, for the most part, remain undeterred by wider financial uncertainty in the case of home purchases.

“While the intense levels of buyer competition may not be as prevalent as the peaks we witnessed at the start of the year, the market remains in agreement that a sudden drop off will be unlikely. Many areas of the country remain underpinned by unsatisfied buyer demand, whilst properties at the top and mid end of the market continue to perform well across the national Jackson-Stops network, particularly in Chichester, Newmarket, Northampton, and Woking.

“Getting a transaction over the line in the current climate can feel like a thankless – and challenging – task but buyers and sellers must remain resolute in their commitment to the transaction in order to secure a quick completion.”

Matthew Thompson, head of sales at Chestertons, added: “As the cost-of-living crisis is looming, some buyers are compromising on their priorities in order to secure a property under their initial budget.”

Jason Tebb, chief executive officer of OnTheMarket, said the housing industry waits to see what impact “further political events and the appointment of another prime minister will have on buyer and seller sentiment”. But for now, the housing market, he says the housing market remains “remarkably robust”.

He commented: “Transaction levels in September remained consistent with August as the housing market continues to show remarkable resilience, despite considerable headwinds. Ultimately, those serious about moving and who need to move, continue to do so as the aspiration to buy property remains.

“With the highest stock levels since March 2021, the inevitable rebalancing of supply and demand continues. Our own data indicates that sentiment remained positive in September with 79% of sellers confident they could complete a sale within the next three months.” Housing transactions nudged up in September as faith in the housing market seems to be much firmer than our faith in our politicians at the moment.

Property market analyst and CEO of Twindig, Anthony Codling, agrees that the housing market has shown remarkable resilience, but warns that that there are stronger “market headwinds” ahead.

“Housing transactions nudged up in September as faith in the housing market seems to be much firmer than our faith in our politicians at the moment.

“However, we do expect the housing market headwinds to get stronger, but that does not mean that housing transactions should fall off a cliff. Mortgage rates are rising and are likely to rise significantly in the coming months, for many the impact of rising mortgage rates will outweigh the impact of falling house prices.

“You may well be better off completing today at a higher price than tomorrow with a lower price but a higher mortgage rate.”

Simon Webb, managing director of capital markets and finance at LiveMore, concurred: “We would expect the housing market to start cooling as mortgages rates are rising fast and the cost-of-living crisis puts a strain on people’s finances. To add to this financial pressure, the Bank of England is expected to raise the base rate again next week to try to curb inflation, with the market expecting an increase by as much as 1%.

“Demand however, is still there, despite house prices continuing to rise, albeit at a slower growth rate than last year when the market was fuelled by the stamp duty holiday. The recently announced stamp duty change could also prop up the market for homes worth under £500,000. The bottom line is a shortage of houses for sale and not enough new property is being built fast enough to keep up with demand.”

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