The latest data on property transactions from HMRC reveals a significant year-on-year decline in the UK property market for April 2023, indicating a challenging start to the spring selling season.
The provisional non-seasonally adjusted estimate of the number of residential transactions in April 2023 is 67,220, a 32% drop from the same period in 2022, and a 29% decrease from March 2023, according to new data.
Additionally, the provisional seasonally adjusted estimate of residential transactions in April 2023 is 82,120, marking a 25% decrease from April 2022 and an 8% drop from March 2023.
In the non-residential sector, April 2023 saw an estimated 8,870 transactions, a decrease of 17% from April 2022, and 32% lower than the previous month. The seasonally adjusted estimate is at 9,570, an 11% decrease from the previous year, and a 10% decline from March 2023.
These figures represent a return to the downward trend in transaction levels across both the residential and non-residential sectors following a spike in March 2023. This spike was attributed to a higher number of working days in March, as well as the final month of the Government’s Help To Buy Equity Loan Scheme.
Alex Lyle, director of Richmond estate agency Antony Roberts, said that despite the disappointing figures, the market behaviour is not uniform. Lyle explained: “The most desirable houses – £1.5m-plus family homes – are going under offer within three weeks of marketing. However, flats, particularly those compromised in some way, are struggling to achieve the prices we could have expected this time last year.”
Lyle also highlighted protracted transaction times as a potential issue, noting an increased workload for solicitors.
Tomer Aboody, director of property lender MT Finance, suggested the need for market stimulus to counteract the downward trend. He said that with interest rates rising, buyers are faced with uncertainty and are unsure whether to wait or make a move.
“With a general election in 18 months’ time, it would be a good way for the Government to boost the economy and get the property market thriving once more,” Aboody proposed. He also emphasised the necessity of incentives to encourage sellers, particularly downsizers, to enter the market.
Further reaction
Kevin Roberts, managing director, Legal & General Mortgage Services:
“Following the slight uptick in property transactions in March, today’s data similarly suggests that buyers and sellers are steadily returning to the market. Although transaction figures no longer resemble the highs we saw during the pandemic, activity is still proving to be much more resilient than we had anticipated.
“After almost a decade of ultra-low interest rates, buyers are still adjusting to a new borrowing landscape. Innovative new products are helping to meet buyers’ changing needs, but they’re also adding new levels of complexity. All this means that the role of expert and experienced advisers is becoming absolutely essential. Only by speaking with an adviser can buyers get a tailored service that suits their circumstances and provides access to different rates and products across the whole market.”
Nicky Stevenson, Managing Director at national estate agent group Fine & Country:
“A slowdown in the property market last autumn as a result of the mini-Budget has fed into April’s sales figures.
“Due to the time it takes to complete on a property, many of these sales will have been agreed just as mortgage rates spiked, resulting in some transactions stalling due to affordability issues.
“We will see sales numbers increase soon, as property market activity has grown in recent months as mortgage rates have stabilised. Mortgage approvals, an indicator of future transactions, have also been ticking up.
“This boost in activity is partly down to increased buyer confidence, alongside an increasing pipeline of new homes going up for sale, which is giving buyers much more choice and feeding their enthusiasm to begin their property search.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“Property transactions continue to fall following a month-on-month rise in March primarily due to more working days compared to February and April.
“The slowdown is likely to continue as uncertainty in the economy along with the high cost of living and rising mortgage rates will put some people off moving home. Until inflation comes down to more palatable levels and Bank base rate reduces, we expect 2023 to deliver a subdued housing market.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These numbers are not particularly surprising as they not only relate to improvements in activity since the beginning of this year but also include the period immediately following last September’s mini-Budget when many pressed the pause button for several weeks.
“There is no doubt that the reduction in competition for property will show itself in transactions, which are a better indicator of market health than more volatile prices. Sales are taking longer and there is not the same urgency we saw previously.
“Looking forward, we expect ups and downs bearing in mind worsening expected inflation data released last week.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Transaction numbers are coming under pressure in the face of higher interest rates and the cost of living uncertainty.
“Swap rates, which underpin the pricing of fixed-rate mortgages, have risen again on the back of the inflation news. Lenders are busy repricing their fixed rates upwards so borrowers coming up to remortgage or looking for a new deal would be wise to seek advice from a broker and consider securing a rate sooner rather than later.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:
“It’s no surprise that transaction levels are down significantly compared to a year ago following the mini-Budget. In recent months, we have seen the market begin to awaken from its prolonged slumber, with buyers returning and getting used to the new mortgage rate environment. That, of course, was before the latest inflation figures caused SWAP rates and therefore mortgage rates to start to increase again.
“This will undoubtedly have an effect on buyer affordability, mortgage choice, and therefore transaction levels going forward. With many hoping the second quarter would be the start of a new normal market, this now looks like it will be pushed back to the third quarter. If the Bank of England panics and puts rates up much further, this could have a profound effect on the housing market.”
Craig Fish, managing director at London-based mortgage broker Lodestone:
“So much has changed between this year and last, with the mini-Budget the major cause. We were witnessing more normal levels of residential property transactions through April and May, but with the current turmoil that we are seeing there could be some stagnation moving forward.
“We have already had some clients tell us that their property plans are on hold until things settle down. Further rate rises could continue to dampen property transactions, but the hope is that as inflation drops, conditions will improve and we could see a strong end to 2023, which should continue into 2024.”
Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions:
“Thanks to the mini-Budget, transaction levels in April were much lower than the same month last year. But over the past two months we have seen a return to a more normal level of transactions. Based on client mortgage offers already issued, June is shaping up to be similarly consistent and relatively positive.
“However, the volatility with lender behaviour over the past week or so alongside uncertainty and instability around interest rates may mean that the second half of 2023 contains a fair degree of transactional hesitation as buyers await clear and sustained indication that interest rates may finally have peaked and they can move forward with any plans with greater confidence.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages:
“That was then and this is now.The current mortgage market volatility we have that was sparked by the inflation data could restrain property transactions moving forward, with rising rates potentially deterring buyers.
“Further limits on transaction levels could occur if the Base Rate heads towards 5%, potentially inducing a property market slowdown. Projecting 2023’s trends is difficult, but unless there is some substantial positive news, escalating rates could prompt a reduction in transactions during the rest of 2023.”
John Phillips, national operations director at Just Mortgages:
“This drop in property transactions is disappointing but not unexpected after a surprisingly strong March. It’s been a turbulent time in housing market with widespread disappointment that interest rates climbed to 4.5% this month although it’s predicted that this is where they will plateau before falling thanks to inflation finally moving in the right direction.
“We are still getting reports of strong enquiries for new mortgage applications from our brokers across the country and many believe that resilient house prices have maintained a faith in the mousing market and the underlying security of bricks and mortar. Although most of the headlines about the housing market are financial, we should remember that people are buying homes and not just houses and that’s what is really important and driving new business. We fully expect transactions to increase over the coming months as interest rates fall and lower inflation reduces the cost-of-living burden.”
Karen Noye mortgage expert at Quilter:
“The provisional seasonally adjusted estimate of the number of UK residential transactions in April 2023 shows there has been a huge 25% fall compared to the same month last year, and an 8% drop compared to March 2023. Residential transactions are now at their lowest level since October 2021
“While the economic path is starting to look a little more predictable and we had seen an uptick in transactions in March, April’s figures show a return to the buoyant market we had grown accustomed to is not yet on the cards.
“The spring and summer months typically bring more demand to the housing market but while inflation has finally started its descent, high mortgage rates could continue to put a dampener on transactions as moving home or taking the first step onto the property ladder becomes increasingly unaffordable. The Bank of England hiked its base rate to 4.5% in May and it is not expected to stop there. Lenders have continued to up their mortgage rates in response, and they are likely to increase further should the Bank hike rates again. However, with a decrease in demand, competition between lenders may keep any rises at a more reasonable pace than the highs witnessed at the end of last year.
“House prices have been slowly declining in recent months, reflecting the decreased level of demand, and we can expect them to continue falling steadily for a few months yet as sellers compete for buyers. For those still keen to move or buy their first home, where possible it may be worth considering a fixed-term deal for two years to make the most of lower predicted rates in 2025. If you are considering opting for a tracker mortgage to see you out of the current period of inflated rates, it is important to consider the potential for further BoE rate rises and the impact this would have on your monthly outgoings. Given the market is proving fairly unpredictable, it is important to seek professional advice to ensure you make the best choice for your personal financial circumstances.”
Jonathan Hopper, CEO of Garrington Property Finders:
“Even allowing for the fact that March’s sales volumes were buoyed by the final flourish of the Help to Buy scheme, April’s 29% month-on-month fall in transactions will have caused a sharp intake of breath.
“On a non-seasonally adjusted basis, the number of homes sold in April was down a third on the same month in 2022 and 40% down on April 2021. This year’s spring bounce in sales was nowhere to be seen as the post-Truss paralysis dragged on into the early part of 2023.
“Fortunately, on the front-line the market is slowly becoming more free-flowing as softening prices pique the interest of tactical buyers who sense that there are now some bargains to be had.
“We’re even seeing some first-time buyers, fed up with soaring rental costs, return to the market – and in many cases they are being drawn to the former investment properties being sold off by buy-to-let landlords for whom the sums no longer add up.
“The number of homes for sale is inching up, and in coming months the improving levels of buyer interest should translate into higher numbers of completed sales.
“Nevertheless in many parts of the UK, it’s a buyer’s market and homes that are priced competitively are selling well; overly optimistic sellers risk seeing their home sit on the shelf as buyers feel they have both time and choice on their side.”
Paul Glynn, CEO of Air:
“Following the unexpected uptick in property transactions in April, it is vital to always take a longer view when interpreting the housing market. UK residential transactions have weathered some significant turbulence in recent years, and yet the market has more than proved its resilience. Overall, activity has been similar to pre-pandemic levels, but with rates likely to be choppy in the shorter term, we have not hit smooth water just yet.
“Indeed, with the Bank of England struggling to gain control of inflation and further rate increases mooted, we are likely to see an even more challenging environment for homeowners and their families. Whether you are struggling to take your first steps onto the property ladder, facing affordability challenges around remortgaging or stuck on your lenders SVR, many people are worried about the future.
“While I don’t have a crystal ball, what I can predict is that more people will look to advisers to help them navigate through these challenges. Using their unique knowledge of lenders criteria and able to find exclusive deals, advisers whether they operate in the residential market or the later life lending market will become an even more important cog in the machine when it comes to the housing market.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“It is clear that there has been a readjustment in the property market, but it shouldn’t be a surprise considering the financial challenges facing households.
“The market is moving slower than this time last year, when it had been whipped up to a frenzied pace. Properties were going from listing to offer in weeks.
“Lenders began to cut down on their mortgage offers following the disastrous effects of the ‘mini-budget’ and we have seen consecutive interest rate rises ever since. Both of these have made it difficult for people to get on the ladder.
“Affordability remains the biggest barrier to home ownership, as households are wary of tying themselves to a mortgage they cannot afford. As rental prices continue to climb, it’s also making it difficult to save for a deposit.
“While sales may have slowed down, estate agents have been using the quieter time to replenish their stock. As house prices remain buoyant, we should see sales recover in the second half of the year.”
Vikki Jefferies, propositions director at PRIMIS:
“Stubborn inflation and the cost-of-living crisis continue to have a significant impact on the housing market, with the most recent data reflecting a cooling in property price growth. However, it is reassuring that transaction figures are still well above pre-pandemic levels, highlighting a resilient and active market.
“Continued, albeit slower, growth in house prices also represents healthy demand – one of the reasons we expect property transactions to remain stable in the months to come. Having said this, recent news that the Bank of England is looking to further raise interest rates this summer has caused some lenders to withdraw some products from the market in the last few days. Swap rates have also increased in response to this news, meaning some mortgage rates will increase in the short term as well.
“Given this, it is important that lenders and brokers work together to ensure that consumers are as informed as they can be on what products are available to them in this constantly evolving market. Brokers are in a strong position to support prospective buyers and to help them navigate these challenges effectively. Mortgage networks’ training and workshops can provide invaluable support for brokers in managing customer and lender relations throughout this period.”
