Cheaper mortgage rates fail to halt slump in house sales

Published on 2nd January 2024, 10:32am

Data from HMRC shows property transactions fall for the third consecutive month, with an annual drop of 22%.

Residential property sales fell for the third month in a row as the market reacts cautiously to interest rates.

Figures from HMRC show that November saw another drop in deals done, with seasonally and non-seasonally adjusted transactions down by 1% and 2% respectively.

While non-seasonally adjusted residential transactions have fallen by 22% since November 2022.

LOWER ESTIMATE

The non-seasonally adjusted estimate of the number of residential sales in November is 87,640, 2% lower than in October.

And the seasonally adjusted estimate is 80,780, 1% lower than October.

The Bank of England held the base rate at 5.25% for the third consecutive time last month, and mortgage costs are slowly edging downwards.

‘BRUTAL MIX’

Nathan Emerson, CEO Propertymark, says: “2023 has not been without challenges for the housing market, with price fluctuations being a strong indicator of wider economic health.

“We have seen a brutal mix of high inflation and elevated interest rates knock consumer confidence across the year.”

He says the “peak of the turmoil is now hopefully behind us”, but there are still reasons to be cautious over the next few months.

“We are currently seeing pockets of house price growth, which is reassuring, but to be fully confident this must be universally seen across the entire UK.”

Most of the correction in house prices looks to be behind us”.

Tom Bill, head of UK residential research at Knight Frank, says: “UK property transactions are a fifth below their five-year average, which has been the real story of this slowdown rather than a fall in prices as buyers adapt to higher rates.

“However, given that inflation has dipped below 4% and mortgage rates are heading in the same direction, we expect sales activity to be stronger over the next six months than the last six.

“Pre-election giveaways may boost the market further in 2024 although demand tends to soften as political uncertainty rises. Either way, most of the correction in house prices looks to be behind us.”

SLIPPED AGAIN

Mark Harris, CEO at mortgage broker SPF Private Clients, says: “Transaction numbers have slipped again in the face of higher mortgage rates and the cost of living, as borrowers reassess what they can afford to pay.

“Encouragingly, the direction of travel for new mortgage rates is downwards, with fixed rates looking increasingly attractive.

“However, borrowers do have to accept that they will pay considerably more now than in the heady days of sub-1 per cent mortgages.”

STRONGER PROPERTY MARKET

Tomer Aboody, director of property lender MT Finance, says: “Less confidence in the housing market, along with higher mortgage costs, has resulted in a lower level of transactions as buyers and sellers were not motivated to transact.

“However, there should be more encouraging signs to come in 2024 as rates seemed to have peaked and inflation is reducing, which will hopefully translate into a stronger market with an uptick in transactions.

“Some assistance from the government might be needed in order to persuade or encourage sellers to finally move.”

Our offices registered 34% more buyers making an offer in November compared to the same month last year.”

Matt Thompson, head of sales at Chestertons, says: “Our offices registered 34% more buyers making an offer in November compared to the same month last year.

“A lot of this is driven by pent-up demand and house hunters feeling more confident following the announcement of interest rates remaining at 5.25% for the time being.

“We forecast for UK house prices to experience a slight decline of -0.3% over 2024, while London prices will show growth of 1.8% due to the higher number of cash buyers that are less affected by interest rates.”

House sales slump 17% in September as cost of living continues to bite

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