Monthly sales growth slows as buyers hold off - HMRC

Property sales are yet to decline amid higher mortgage rates and the cost of living crisis but there are signs of a slowdown, HMRC data suggests.

The latest property transaction statistics from the taxman show residential sales rose 4% between October and November 2022 on a non-seasonally adjusted basis and were under 1% higher when seasonal adjustments are made.

Transactions were up 12% annually on a non-seasonally adjusted basis and 13% higher seasonally but HMRC highlights that these comparisons are against last year’s Stamp Duty holiday.

The monthly growth figures are down slightly. In comparison, sales rose 1.4% on a seasonally adjusted basis between September and October.

Commenting on the data, Charlotte Nixon, mortgage expert at wealth manager Quilter, said: “The cost-of-living crisis is still yet to take a real toll on the property market, as the number of monthly property transactions has not yet started to tail off as had been expected.

“While property transactions are yet to fall, they are certainly beginning to slow. A fall in house prices is widely anticipated for next year – Nationwide just shared its prediction that house prices could lower by 5% in 2023 – and slowing property transactions is likely the first sign that this could materialise as reduced demand goes hand in hand with reduced prices.

“The Bank of England has now hiked its Base Rate to 3.5%, which will have a knock-on effect on mortgage rates – primarily for those on variable rate mortgages. As such, more people may opt to hold off on purchasing a home as the monthly costs rise and become that much more unaffordable, which will only further reduce demand.

“The Government has now announced that its 95% mortgage guarantee scheme will be extended by a year, which should help first-time buyers purchase their first home amid a very trying time.

“This extension, coupled with the changes made to Stamp Duty at the mini-Budget in September, could keep property transactions at a higher level than they might otherwise have been. However, given the high level of mortgage rates and soaring everyday costs, we are still likely to see a dip as we head into 2023.”

Frances McDonald, research analyst at Savills, added: “In light of the economic backdrop, transaction figures coming out of HMRC remain surprisingly strong, in part reflecting the urgency of buyers to lack into mortgage deals agreed before the rate rises of the past three months.

“However, lead indicators from the RICS, Bank of England and mains listings agencies, suggest a somewhat lower turnover market next year due to limited mortgage product availability, along with high rates and stretched affordability.

“Looking ahead to the early part of 2023, our latest buyer and seller survey suggests that needs-based buyers are likely to be the most active buyer types whilst mortgage rates remain high and affordability constraints more discretionary and lifestyle moves. But levels of commitment to moving amongst those looking to ‘right-size’ their homes, whether upsizers or downsizers, rise significantly over the next year or two.”