The latest HMRC property data reveals a decrease in UK residential property transactions in September 2023 compared to the previous month and year.
Meanwhile, non-residential transactions experienced a slight upturn from August 2023, though they remain lower than the figures recorded in September 2022.
The provisional non-seasonally adjusted estimate reveals that residential transactions for September stood at 92,600, marking a 19% decrease from the same month in the previous year and a 2% dip from August 2023.
On the other hand, the provisional seasonally adjusted figure for the month is at 85,610, down by 17% compared to September 2022 and 1% lower than the preceding month.
In terms of non-residential transactions, the provisional non-seasonally adjusted estimate for September is 10,060, 6% less than September 2022 but a 7% increase from August 2023.
The seasonally adjusted figure for non-residential transactions is 9,760, which is 4% lower than the previous year but sees a slight increase of 1% from August 2023.
The residential market’s recent month-on-month decrease breaks its upward trajectory that was observed since May 2023, indicating changing dynamics in the UK property scene.
Terry Woodley, MD of Development Finance at Shawbrook, said: “Economic headwinds and the impact of high interest rates have contributed to a decrease in property transactions.
“Rising costs will continue to challenge developers, with 40% stating it as their main concern. Consequently, 96% have adjusted their business strategy in the past year.
“Developers are now keen to finish projects swiftly to counteract rising costs and diminishing demand.”
Woodley also touched upon a shift in developers’ preferences. “Developers are exploring alternative strategies, moving their focus away from private housing developments.
“Our findings suggest a higher priority for hospitality and leisure developments, followed by city flats, student accommodation, and high street retail units, underscoring the evolving market landscape,” he added.
Further reaction
Kay Westgarth, director of sales, Standard Life Home Finance:
“While we have seen a reduced level of activity in the property market over the last couple of months in comparison to the norm, the broader economic trends are more positive. The decline in the rate of inflation, albeit minor, to 6.7% in September and the fact that average wage growth in the UK rose above inflation in August for the first time in almost two years, means that positive sentiment is starting to build in the market.
“However, reduced activity will mean that affordability will continue to be stretched, in particular for first-time buyers who are facing higher rates than their predecessors. With this in mind, many first-time buyers will be looking for support from family and friends to help boost their chances of getting onto the property ladder.
“One way homeowners over the age of 55 could do this is by unlocking wealth from their property. It is vital that any individuals considering this secure the guidance of a professional adviser who can guide them on the many options and solutions available to them, whether equity release, wider later life lending, or through other means.”
Riz Malik, director at Southend-on-Sea-based independent mortgage broker, R3 Mortgages:
“The rise in residential property transactions compared to the previous quarter will have come off a low base as the impact of the mini-Budget would still have been filtering through.
“The property market is done for 2023 and not even an exorcism could expel the pernicious spirits that currently possess it.
“Another rate hold coupled with a stamp duty incentive in the Autumn Statement may result in a dead cat bounce. But with more ghoulish economic data ahead, people will continue to sit on their hands.”
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages:
“Compared to a year ago, transactions are down by almost a fifth, but the data is at least more positive than the previous quarter.
“But higher mortgage rates, weak consumer sentiment and house prices still not significantly reducing means completed sales figures are unlikely to improve materially until 2024.
“The next Bank of England base rate decision will greatly impact the speed of recovery.”
Darryl Dhoffer, director at Bedford-based independent mortgage broker, The Mortgage Expert:
“Residential property transactions have been far lower than usual in recent months. According to the Royal Institution of Chartered Surveyors (RICS), the number of new buyer enquiries fell for a seventh consecutive month in September 2023, while the number of agreed sales fell for a fifth consecutive month. This is the longest period of decline since the global financial crisis.
“I expect property transactions to pick up in early 2024, once the economic outlook becomes more certain and inflation begins to fall. However, it is important to note that the UK housing market is cyclical and there is always the possibility of a more prolonged downturn.
“There is more activity now compared to the summer, but it is still well below normal levels. This is likely due to the fact that people are waiting to see how the economy develops before making any major financial decisions.”
Tim Murphy, founder & chairman at IP Global:
“While there is still enthusiasm for property in the UK, the volume of residential property transactions has experienced a decrease in pace as potential buyers adopt a more patient and discerning approach.
“Interest rates have definitely dampened demand but the limited supply of properties in the UK, coupled with growing challenges in construction, will provide a degree of support to prices.
“Consequently, a correction in house prices seems more likely than a complete collapse, primarily due to the scarcity of supply and new housing development.”
Charlotte Nixon, mortgage expert at Quilter:
“The UK property market remains in a deep freeze as the icy winds of higher interest rates blow demand out of the market causing UK residential transactions to be 17% lower than September 2022 and 1% lower than August 2023 when seasonally adjusted.
“The normally busy summer months for property sales have been remarkably quiet with many buyers either sitting on their hands or simply put off altogether from the housing market. This has caused transaction levels to fall off a cliff. Usually as winter draws in property sales do start to slow anyway but this level of transactions is cause for concern for house prices.
“The interest rate decision later this week will also play a role in how house prices fair in the future. Inflation remains stubbornly high and if the Bank of England opts to raise interest rates once again it will prolong the dearth of demand in the market. Many analysts believe that the Bank of England will opt to hold which at the least will give potential borrowers some level of stability and potentially coax some to market especially given how high rents are at the moment.
“If the number of property deals continue to drop prices will drop with them as transaction levels act as a bellwether for the health of the market.”
Andy Sommerville, director at Search Acumen:
“It appears to be fright night for estate agents in the UK today, with latest HMRC transaction figures showing limited growth in the residential sector as interest rates continue to spook investors.
“As house prices waver, demand is being curbed by mortgage affordability. Banks are now predicting house prices might continue to fall through to next year before recovering. It’s the same overriding issue that’s subduing the commercial property markets as investors are having to devote more of their time to debt refinancing, while the question in most boardrooms is whether it makes more sense to press go on investment opportunities now or postpone decisions in the hope that rates will fall in short to medium term.
“In more challenging market conditions, investors need any edge they can find to maximise returns. It’s been a breakout year for AI and technologies like this have vast potential to help investors make better decisions, whether that’s about finding a competitive edge in a booming market, or mitigating risk during more challenging times. As investors and property owners look for better information to inform their decisions, data and technology can provide new insights to make sense of uncertain market conditions.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“These figures are a little dated so reflect buyer and seller decision-making from a few months ago when trying to come to terms with sharply-rising inflation and mortgage payments.
“Transactions, which of course are a better indicator of market health than prices, though softening have held up than many expected this year but are likely to get worse before they improve and until mortgage rates start to fall more noticeably.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Transaction numbers have slipped again in the face of higher interest rates and the cost of living, as borrowers reassess what they can afford to pay.
“Swap rates, which underpin the pricing of fixed-rate mortgages, are trending down again after a recent blip. While the direction of travel for new mortgage rates is generally downwards, we have seen a few lenders pull rates in the past few days, although this has been primarily in order to slow business.
“All eyes are on the Bank of England to see whether they hold rates again at the coming meeting and allow the dust to settle.”
Tony Hall, head of business development, Saffron for Intermediaries:
“Falling mortgage rates and stable swap rates are helping to spark activity amidst the darkened economic backdrop. And although enquiries from new buyers are slightly down on last month, the market continues to be buoyed by a high volume of refinance activity, with UK Finance reporting that £17.5bn was spent on remortgaging in the UK in Q1 alone. The outlook for November and December therefore remains firmly positive (although of course subject to any nasty surprises).
“There is also great opportunity to boost this activity further by dispelling the myth of an imminent return to the 1-2% rates that we saw at the outset of the pandemic, and flash sale on house prices (as a response to the broader economic decline). Demand remains robust and while lenders are starting to compete on pricing, any significant changes are unlikely. We are firmly in a new, post-Covid era, and borrowers must understand that the market conditions and pricing models are very distinct from those seen in the past three years.”
Joshua Elash, director of property lender MT Finance:
“Transactional activity in the residential sector is down and this is consistent with what we are seeing on the ground. Would-be homeowners continue to be put off by uncertain market conditions and a higher interest rate environment.
“Investment is challenging with the availability of buy-to-let mortgages significantly down and the costs of these mortgages significantly up.
“The smart investment money seems to be sat in the non-residential space where transactional activity is up and where opportunities to acquire assets at a good yield create an offset against the higher interest rates borrowers are now having to get accustomed to paying.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“The housing market has been more subdued this year than last year as the cost-of-living bites into many peoples finances. September saw the first small decrease in property transactions in four months but it is almost a fifth lower than last year.
“Yesterday’s mortgage data from the Bank of England showed a substantial drop in net lending and although mortgage rates are coming down, they are still high for many people. This background means house prices are lower than last year although there is more housing stock on estate agents books but less potential buyers coming through the doors.
“With storms and flooding affecting many homes and communities too, it is likely to be a quieter autumn for house buying and selling.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“The transactions completed in September have been in the pipeline for months. At the time these transactions started we were going through a period of constantly rising interest rates and inflation. Confidence was obviously low at that point and to be honest, we might have expected to see even lower numbers crossing the line. This is especially true when we hear about the number of chains that broke as mortgage offers were pulled earlier in the year.
“With the next MPC interest rate decision just around the corner and the Autumn Statement in a few weeks, there is still a lot that can happen to help, or even disrupt the housing market further. If the Chancellor does as he has been promising to ‘fix our broken housing market’ we may hear something more positive in his speech. However, any changes or help announced will take time to filter through, so we are unlikely to see much change in the next few months. Looking at the drop in the number of remortgage approvals last month, it appears borrowers are still not ready to start fixing their rates. It really is a waiting game at the moment and that will be affecting lender targets to lend.”
Carl Parker, national director at Just Mortgages:
“Rather than causing a fright, I’m sure today’s news will be expected by many given the challenging market we find ourselves in. In previous Septembers, we may expect activity to increase after the summer break and carry through to the end of the year. However, clear concerns around affordability are still hampering enthusiasm across the market. Lenders are playing their part with rates and it’s certainly not an issue of availability of funds, it comes down to people wanting and having the confidence to move.
“While not as high as last year, we are still seeing consistent levels of buyer registrations, demonstrating there is some appetite in the market, but mainly among those who need to move rather than want to. It’s an important reminder of the essential role brokers play in educating clients in the realities of the market and what it means for each client’s individual circumstances. As brokers, we have to remain proactive in these efforts.
“It also serves to remind brokers to explore all opportunities and potential revenue streams – making sure they have the necessary support structure around them to make this a reality. In recent months, we have not only seen strong demand for our business protection licence training, we’ve just launched our next round of equity release licence workshops to support ambitious brokers in maximising every opportunity.”
Mark Tosetti, partnerships director at Movera said:
“With September data based on applications and approvals from months before, the effects of mounting interest rates in a challenging market are still evident. No major surprises in this morning’s data with a marginally drop September transactions against August, and a 17% drop year on year, which was just before the horror show mini budget.
“After the steadying of inflation, all eyes will be on the MPC decision on Thursday. The industry will be hopeful of a smoother close to the year.
“Through collaboration with our partners, the focus will be on providing expert advice for those looking to move or remortgage this year, in particular the reported 340,000 fixed-rates loans coming to an end in Q4 and further 1.6 million in 2024.”
Nick Leeming, Chairman of Jackson-Stops:
“Transactions remain consistent month on month, another indication that the market has shown stability in the face of wider economic challenges.
“However, there has been a gradual increase in the length of time it is taking from offer accepted through to completion. Particularly for longer chains that are reliant on multiple mortgages being approved and accurate valuations, the risk of fall-throughs only rises.
“Buyers and sellers are taking a level headed approach to property sales, with sensible pricing and committed movers clearly underpinning market activity. Cash buyers that remove the risk of down valuations and whose offers are often taken seriously due to the quick move times they allow, are dominating several regional trends. At moments like this, accurate pricing that considers local market conditions, is essential. But certain local market nuances are continuing to emerge; across the Jackson-Stops network, Sherborne, Norwich and Blandford are showing the biggest increases in transaction volumes, with buyers continuing to outnumber sellers month on month.
“The reality is that the market continues to be faced with a backlog of transactions, outstanding from the frenetic activity levels of 2021. While the market was enjoying its extended moment in the sun, the arrival of a more balanced market does mean that only committed buyers are moving ahead with purchases, which should help chains to move forward meaningfully.
“The market will be hoping that the Bank of England maintains the base rate at 5.5%, in light of easing inflationary pressures, in order to help restore buyer and lender confidence ahead of a seasonally quieter period for the market.”
Chris Little, chief revenue officer at finova:
“Today’s slight dip in transactions shouldn’t sound any alarm bells in the market. The long-lasting effects of last year’s mini-Budget have dragged on this year, but we are already seeing the ‘big six’ lenders making rate cuts across their product ranges, giving a glimmer of hope that the lending slump is reaching its end. Lenders could also start pricing more aggressively to both retain and expand their customer base going into next year, especially if the Bank of England keeps rates on hold this Thursday.
“A focus on customer attraction and retention in this changing environment will necessitate lenders being agile and dynamic with their pricing. Instead of relying on legacy systems, automation software solutions can help them keep up with demand, all while making better-informed pricing decisions which will be vital as the market moves forward.”
