The latest HMRC data on residential and non-residential property transactions in the UK for June 2023 shows a mixed picture of declining yearly growth but an increase in monthly activity.
According to the provisional non-seasonally adjusted estimates, there were 94,690 residential transactions in June 2023. This represents a 9% decline compared to the same month in 2022, but a notable 28% increase from May 2023.
On the other hand, the seasonally adjusted estimates showed a total of 85,870 transactions, reflecting a 15% fall year-on-year, but a modest 6% rise from May 2023.
In the non-residential property sector, the provisional non-seasonally adjusted estimates recorded 10,350 transactions in June 2023.
These numbers are slightly down by 1% compared to June 2022, but up by 17% compared to the previous month.
The seasonally adjusted estimates indicate a total of 9,670 non-residential transactions, a 4% drop year-on-year but a 5% increase from May 2023.
While the year-on-year data reveals a downward trend in property transactions across both residential and non-residential sectors, the month-on-month figures show a bounce-back in activity.
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Clare Beardmore, director, Legal & General Mortgage Club:
“Today’s data reflects a rise in overall property transactions. Of course, this does indicate a correction to the strong market we saw before the pandemic, but it may also show that buyers are putting their plans on hold in the hope of more favourable conditions. The UK housing market has a proven track record of weathering strong headwinds, but borrowers will need ample reassurance that rising interest rates and the cost-of-living crisis are not going to slam the shutters closed for first-time buyers or those who are moving home.
“Volatility is concerning for borrowers, and so advisers have a crucial part to play in helping them steer a path through the complexities of the current market. While affordability remains a key barrier for first-time buyers, they are still making huge strides, taking advantage of slower house price growth and financial support from the ‘Bank of Family’ to step onto the ladder. With this in mind, the value of expert and bespoke guidance cannot be underestimated. If anyone is considering buying a home, remortgaging, or switching to an interest-only product, a professional adviser should always be their very first port of call.”
Vikki Jefferies, propositions director at PRIMIS:
“The fact that transaction figures remain above pre-pandemic levels, will hopefully bring some confidence to the market. While higher borrowing costs and the ongoing cost-of-living crisis clearly continue to weigh on the market, brokers are still seeing a steady stream of activity as first time buyers and home movers try to overcome affordability challenges.
“We are also seeing increased refinancing activity, as borrowers look to secure the best deal they can in light of the news that interest rates may increase further this year. In the same vein, potential second time purchasers will be considering all of their options. For example, they may consider taking out a further advance, while keeping the existing portion of their mortgage at the old rate. This could be a more suitable option than paying an early repayment charge and looking for another mortgage.
“Given there is plenty of activity in the pipeline, brokers should look to tap into sources of training and support, such as mortgage networks, which will allow them to best support consumers during this challenging period.”
Kay Westgarth, sales director at Standard Life Home Finance:
“The financial services sector has been working tirelessly to prepare for today when the FCA’s Consumer Duty regulation comes into force for new products. The scale of work needed to ensure compliance across the whole sector has been almost unprecedented, as has the collaboration between advisers, financial services companies and lenders to meet the new requirements.
“While the sector is well-prepared for the deadline, now is not the time to rest on our laurels but to live and breathe the new legislation. This is not a ‘one and done’ initiative and a lot of hard work will be needed in the months and years to come to ensure compliance – and to make our industry better for all customers.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages:
“There is probably more life on Mars than there is in the UK housing market at the moment. But if interest rates have almost hit their highest point, things could start to improve. This week, some lenders have started to lower their mortgage rates marginally due to favourable market conditions.
“So, even if the base rate goes up next week, if the expectation is that interest rates won’t go much higher, we could start to see an increase in property transactions if the cost of borrowing improves. We could then see the slight uptick in activity levels in June on May potentially form a trend.”
Simon Jones, CEO of investing comparison platform Investing Reviews:
“Though transaction levels edged up slightly in June on the previous month, it’s no surprise that transactions are down materially compared to a year ago, as the economic and interest rate environment has changed phenomenally over the past year.
“A booming property market is now ambling along at best, but at least we’ve had some good mortgage news over the past week or so, with a number of major lenders reducing rates. All eyes are now on the next Bank of England interest rate decision and set of inflation data. Both have the ability to determine property transaction levels, and buyer confidence, for the rest of the year.”
Scott Taylor-Barr, director of Leicester-based broker Barnsdale Financial Management:
“In the past two months I’ve written 13 mortgages, of which six were for people buying a new property and all have been residential applications. Whilst I have done four buy-to-let applications, these have all been landlords remortgaging property they already own. I’ve not had a single enquiry around a brand new purchase from any landlords.
“The main influencing factor for the lack of demand is affordability, or rather the perception of affordability, with many people thinking that the mortgage they want or need is going to be far more expensive than it actually ends up being in many cases.”
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages:
“Residential property transactions have certainly decreased over recent months, as rising mortgage rates combine with people holding their breath waiting for the much-needed price correction.
“Only those that really need to buy or move are currently doing so at the moment. On the commercial property front, we have seen plenty of enquiries, but lender appetite seems low, with many lenders raising the minimum borrowing amount and further restricting criteria. So completed transactions appear to be reduced in this sector, too.”
Rich Horner, head of individual protection at MetLife UK:
“Property transactions continue to cool month-on-month as hopeful movers and buyers feel the impact of the cost of living crisis. Times are tough for many and as a result we are seeing more choosing to sit tight rather than make a property-sized financial commitment, particularly with a background of surging mortgage rates. However, with average house prices on the decline and the potential for rates to start to fall, there’s every chance we may see a market resurgence later in 2023.
“Whether deciding to stay put or look for a new home, there has never been a more important time to have affordable financial protection in place. Both existing and prospective homeowners should be considering what precautions they can take to protect what is often their largest, and most valuable, asset. Financial resilience comes in many shapes and sizes but protecting the roof over your head will ultimately give you the best peace of mind if scenarios out of your control, such as injury or illness, make you falter on mortgage payments.”
Terry Woodley, managing director of development finance at Shawbrook:
“While the month-on-month increase may seem like good news, and typical of the often-busier summer months, the data doesn’t tell the whole story and all the signs are pointing towards a slowdown in the market as we see out 2023.
“Property developers will be concerned about reduced demand and longer selling periods, which could affect their ability to cover construction costs, repay loans, or invest in new projects. Access to funding with a specialist that can offer consistency, flexibility and certainty will be a key priority. Seasoned developers will be monitoring the trends closely and re-evaluating their business strategies to make the most of new opportunities. They may need to focus on different market segments, locations, or property types to adapt to changing market conditions.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Transaction numbers are holding up in the face of higher interest rates and the cost of living.
“Swap rates, which underpin the pricing of fixed-rate mortgages, and have been exceptionally volatile in recent weeks, have settled down since the encouraging dip in inflation.
“A number of lenders, including HSBC and Barclays, have reduced their fixed rates so borrowers will be hoping that other lenders follow suit in coming days and weeks, and that the worst of the rate rises are behind us.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi:
“Transactions are a useful indicator of the health of the market, since they illustrate the strength of demand.
“The monthly figures indicate some hope, while the slowdown in transactions from last year is a direct result of increased interest rates, which have stretched housing affordability.
“Higher interest rates impact those who already own a property: many are facing double or triple their previous housing costs. Meanwhile, potential buyers reliant on bank finance are no longer willing or able to pay prices accepted in 2022. Only cash purchasers are not directly affected.
“Homeowners and investors alike are affected. Investors we are working with are purchasing at 20-30% below peak 2022 market values, and only those who need to sell in this market are selling.
“However, it is worth noting that this is a price correction and slowdown in demand follows a mini bubble caused by Covid and Stamp Duty reductions, which created double digit house price growth for much of the last three years. As a result, it is a time for homeowners and investors to review their affordability and mortgage terms and plan for the future, but not a time to panic.”
Ben Waugh, managing director at more2life:
“There was welcome news for homebuyers last week as two-year-fixed mortgage rates fell slightly for the first time in two months. The impact on property transactions will not be evident overnight, but if rates do continue to fall, we should begin to see transactions slowly creep up as consumer confidence returns to the market.
“That said, affordability remains the key challenge to address as while these rates have fallen slightly, we have a long way to go before they are comparable to levels we’ve seen over the last few years. Given the pressure that borrowers – especially those on fixed incomes – are facing, they need to ensure they seek regulated advice to fully understand all their options and how they can make the right choices for their individual circumstances.
“With the Consumer Duty coming into effect from Monday, advisers will be better positioned than ever to provide this support.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“With so many conflicting reports around the state of the housing market and mortgages in particular, we have to take encouragement from the non-seasonally adjusted figures from HMRC today. Although lower than in 2022 the uplift from the number of transactions in May shows a level of confidence returning. Most of these transactions have been in the pipleline for over three months, a time when the hikes in interest rates coupled with the highest inflation for years could have caused a serious lack of confidence. It appears that despite everything the need to move has outweighed these negatives.
“With the news that the American Federal Bank increased interest rates this week, it is understandable that borrowers will be anticipating the Bank of England to do likewise. However, with the recent drops in swap rates, it is up to lenders and brokers to educate their clients that perhaps a base rate rise next week may not necessarily mean an immediate rise in mortgage rates. There are plenty of opportunities, especially in the remortgage market, so a proactive approach is vital to keep things moving in the coming months.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“The property market remains resilient despite soaring mortgage rates, with sales increasing in June.
“Although buyer demand is weaker than last year, it is on a par with 2019, which was a fairly typical year in terms of sales and price growth.
“Despite recent increases in rates, mortgage approvals – an early indicator of future property transactions – rose slightly in May.
“With long delays between agreeing a sale and completing, it suggests that transaction levels could remain broadly stable over the coming months and into early autumn.
“The fall in inflation recorded earlier this month is also raising hopes that the Bank of England can slow down its interest rate hikes, which will bring much more stability to the mortgage market.”
Karen Noye, mortgage expert at Quilter:
“Despite the turbulence of recent times, the UK residential property market has shown remarkable resilience. Although June 2023’s residential transactions indicates a downward trend on a yearly basis The latest data on a seasonally adjusted basis show transactions were down by 15% compared to June 2022 but positively were 6% higher than May.
“This decline in transactions aligns with the growing squeeze on affordability, which is now having tangible effects on the property market. Recent indicators show that house prices were stagnant or dropped.
“Whilst it’s true that June’s transactions have seen a month-on-month increase, this is arguably more reflective of the high number of working days in June relative to May, and possibly an uptick in underlying activity. However, with increasing mortgage rates, the prospect of further interest rate hikes, and a growing squeeze on affordability, the outlook for the housing market remains uncertain.
“The sharp spike in mortgage rates seen in recent weeks is yet to be fully reflected in the housing market data. All this could further exacerbate affordability issues. Current homeowners may struggle to meet their growing mortgage payments, and potential first-time buyers might be deterred by high monthly repayments stifling transaction numbers.
“Moreover, the likelihood of overstretched homeowners looking to offload properties amidst dampened demand presents a worrying future picture. Fortunately, the recent Mortgage Charter is expected to provide homeowners some respite, thus reducing the possibility of a flood of distressed sales.
“The Bank of England faces a delicate balancing act. The recent lower-than-expected inflation figures might give the Bank some leeway to soften their stance on interest rate hikes, easing some pressure on the property market. But with inflation still running way above the 2% target, the Bank can’t afford to be too lax. Any further increase in rates could intensify the affordability crunch and put additional pressure on property prices.
“The path ahead for the UK housing market is mired in uncertainty. Anyone looking to get into the housing market at the moment should try and get expert mortgage advice to find the most suitable product for their needs.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“In the face of high interest rates and a dearth of competitive mortgage offers, the number of property sales is returning to growth.
“There is now some light at the end of the tunnel for the market following a slow start to the year. While the annual picture shows a fall of 15%, keep in mind that this time last year was a feeding frenzy to get hold of any available properties.
“As inflation begins to creep down, hopefully improved mortgage rates will appear on the horizon, which will surely increase the volume of sales further still.
“Estate agents have been using this quiet time to take stock of the properties on their books and try to entice more homeowners to sell. This is shaping the market to be much more in buyers’ favour.
“While sellers may be hesitant to put up the ‘for sale’ sign, house prices have been relatively stable, all things considered, with properties still worth significantly more than pre-pandemic levels.
“Affordability is still a barrier to many people – especially for those that are just falling short of the deposit they need and are struggling to squirrel savings away. This needs to be tackled as a matter of priority if the industry is to continue to show signs of vitality.”
