Residential transactions were down 7% year-on-year in January and a whopping 27% month-on-month, HMRC figures show.
Non-seasonally adjusted figures show the lowest January for transactions in a decade while seasonally adjusted figures show them as last being lower in January 2015.
Non-residential transactions in January 2023 stood at 8,500, 1% lower than January 2022 and 18% lower than December 2022.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “Property sales plummeted in January, making it the slowest start to the year in a decade. Buyers packed up and scarpered – spooked by the hike in mortgage rates in the autumn.
“We saw the slowest January in ten years, as the impact of the mini-Budget fed through into sales figures. And while there’s some lingering optimism that lower mortgages may tempt some buyers back, the heady days of the peak – where at one point we saw more than 214,000 transactions in a month – are well and truly behind us.
“This end of the year is always pretty slow, but this January, property sales moved at a glacial pace, and they’re unlikely to gain much more momentum for some time to come. The RICS Residential Market Survey has charted seven months of falling numbers of agreed sales – since June – and while the pace of the decent slowed in January, it’s still heading south.
“It is taking around three and a half months for agreed sales to translate into completed ones, so even if buyers have been buoyed by falling mortgage rates in the past few weeks, we’re not going to see any evidence of this until the spring. Even then, it’s going to be a far cry from the hectic flurry of sales we have grown increasingly used to.”
Reaction
Stuart Wilson, chairman of Air Club:
“It’s undeniable that interest rates continue to shape a complex economic landscape for advisers and their clients alike, and today’s data from HMRC is a reflection of that. Nevertheless, these figures must be viewed in context. The UK housing market is still outperforming pre-pandemic levels and transactions remain strong in spite of lingering turbulence from Q4 2022.
“We are still in the earliest stages of the year and now the dust has started to settle following the mini-Budget, prospective homeowners may be more inclined to take a step onto the property ladder. But affordability remains a key issue as not only is the cost of living crisis continuing to bite but lenders criteria remains tough.
“It is therefore likely that more people will look towards their older relatives who already own significant unmortgaged housing equity for support. While there are a variety of options to consider, the later life lending market will certainly hold the solution for some. Now is the time for advisers to carefully consider how they can use specialist knowledge to not only support customers but build fruitful referral relationships with advisers who support those looking to purchase.”
Conor Murphy, CEO and founder, Smartr365:
“It is important to remember that the UK mortgage market has been far from ‘normal’ for some time now – we have seen very low interest rates since 2009, and very high house price inflation and transactions since 2020. This year is showing early signs of returning to a more typical market position i.e. correcting house price inflation, interest rates, and activity level.
“Notwithstanding this, activity will likely pick up as we move closer towards the annual ‘spring bounce’, often dubbed the best time to sell. Now is the time for brokers and lenders to reflect on recent market performance and take stock of the learnings. Tech can offer a helping hand behind the scenes, say with managing service levels, but also in day-to-day operations to build a user-friendly platform for customers to interact with. Consumer power is strong, and borrowers will shop elsewhere (often online) if they are not satisfied with your tech offering.”
John Phillips, national operations director at Just Mortgages:
“These transaction figures show us that the housing market is continuing to defy the critics and doom-mongers.
“Significant pressure on household budgets from highinflation, rising mortgage rates and cost of living increases have failed to stall the housing market and transactions have remained robust. Underpinning this are house prices that have refused to collapse despite seemingly constant predictions across the media that they will do so and in reality, average UK house prices increased by 9.8% in the 12 months to December 2022.
“2023 is going to be a pivotal year for mortgage brokers with over 1 million people coming off fixed rates in 2023 and so now is the time for brokers to show their worth and manage clients’ expectations about potential payment shocks and ensure they are on the best possible deal.
“The greatest threat for mortgage borrowers in 2023 is apathy and meekly accepting a lender’s transfer rate without contacting a broker who can shop around to ensure they are on the best available deal.”
Clare Beardmore, director, Legal & General Mortgage Club:
“Although recent activity has not been at the sky-high level we have become accustomed to in the past three years, there is certainly no reason to panic. The UK housing market is famed for its resilience. The pace of lenders beginning to compete on pricing is encouraging buyers to press ahead.
“Product choice is also improving, with Moneyfacts reporting that available products surpassed 4,000 for the first time since August (almost double what it was at the end of October following the ‘mini-Budget’ fallout). As ever, consulting a mortgage adviser is strongly advised – not only do they offer comprehensive, holistic advice based on your individual circumstances, but also often access to exclusive products not available on comparison websites.”
Gareth Lewis, commercial director of property lender MT Finance:
“Volumes are relatively similar to pre-pandemic levels which is encouraging in one sense as the fluctuations caused by stamp duty incentives have disappeared.
“But on the other hand, transaction levels are nowhere near where they need to be. We still need to find a way to stimulate the market and enable more people to buy property, as many are struggling with affordability. There isn’t an easy solution but something has to be done to enable more to get onto the first rung of the ladder.
“It makes sense that January’s transactions would be down on December’s and in coming months, we expect to see more of a downwards trend.”
Avinav Nigam, cofounder of real estate investment platform, IMMO:
“Transactions are a helpful indicator of both feelings (sentiment) and reality (practicalities).
“Falling transactions suggest reduced confidence, and reflect the impact of higher interest rates and more stringent mortgage affordability checks on potential buyers’ ability to buy.
“Since fewer people are able to buy at, say, the price levels of this time last year, fewer transactions happen – until or unless sellers are willing to discount properties they want to sell.
“The impact of this is not felt uniformly. The people who suffer most are younger and poorer people renting now, and aspiring to home ownership. These people need quality, energy-efficient, safe homes more than ever. Since it’s becoming harder for potential buyers to buy a home, demand increases for quality rental homes
“There is an opportunity for professional investors to step in and re-capitalise the rental market, upgrade the quality and energy performance of existing housing, benefitting the people and their communities who need a place to call home.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“A dip in transactions is to be expected at this time of the year, following a rush to complete in time for Christmas and avoid the paperwork in January.
“A slowdown in sales isn’t necessarily bad news for agents, as they have time to pause and replenish the stock they have available to buyers.
“It is possible that buyers are adopting a wait-and-see approach to the market with the expectation that house prices will see substantial falls, however the market continues to defy expectation with house prices holding steady for the time being.
“Prospective buyers being hit hard by the cost-of-living crisis may be deciding to sit on their deposit a while longer. As better mortgage deals return to the market and inflation slowly falls to manageable levels again, we should see demand pick up again.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“There has been a significant drop in the number of non-seasonally adjusted housing transactions in January falling by 27% on the previous month to 77,390. This is the lowest since June 2020 when transaction numbers stood at 67,430 but that was when the UK was just coming out of the first Covid pandemic lockdown.
“With higher mortgage rates than last year and the cost of living bearing down, buying houses will not be at the forefront of people’s minds. With so much economic uncertainty potential home movers will decide to stay put.”
Karen Noye mortgage expert at Quilter:
“Monthly property transactions in December show the beginning of a housing market starting to seize up. However, the number of residential transactions is still up on pre-pandemic numbers but only marginally. The provisional seasonally adjusted estimate of the number of UK residential transactions in December 2022 is 101,920, 1% higher than December 2021 but 3% lower than November 2022.
“The pace of transactions will serve as a canary down the mine for house prices and if the number of transactions drop significantly it is likely that house prices will go with them as supply outstrips demand.
“These statistics are the first that take into account the fallout from the mini-budget and therefore the huge rise in mortgage rates post event. However, since then rates have significantly dropped after their peaks towards the back end of next year which might help keep transactions at least stable as people continue to cautiously enter the market feeling the worst is now behind them.
“Although the cost-of-living crisis is certainly hurting people’s finances, some of the worries about a huge house price crash may have been averted and while transactions and house prices are falling, they may avoid anything akin to 2008. However, while the outlook is certainly more predictable than it was back in December it is still going to be financially difficult for millions and this will undoubtedly have an impact on the number of people choosing to move house.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“This is a huge fall in property transactions in January and is a clear indicator of people’s reluctance to move in the current climate of high inflation and cost of living.
“The HMRC data tallies with other reports such as the RICS UK Residential Survey for January which said home buyer enquiries, agreed sales, new instructions and house prices were on a downward trend. Until the economy gets back of some sort of stable footing, property transactions will probably remain lower than the past couple of years.”
