Residential property sales fell sharply in the past year as months of interest rate rises squeezed first time buyers out of the market putting vital tax revenues at stake
The latest transaction figures from HMRC on stamp duty land tax payments show that 86,510 properties were sold in July 2023, 16% lower than July 2022, showing the severity of the decline.
Charlotte Nixon, mortgage expert at Quilter, said: ‘The provisional seasonally adjusted figures for UK residential transactions in July 2023 show a significant drop of 16% in comparison to July 2022 and only a minor increment of 1% from June 2023 during what should be a typically busy time for purchases.
‘Continuing economic pressure and lingering high inflation makes any hopes of achieving anything like the same level of property transactions to a couple of years ago a slim possibility in the near future. While we can hopefully anticipate a tapering of inflationary pressures in the coming months, the weight of escalating mortgage rates continues to hamper transactions.’
Stamp duty land tax (SDLT) receipts amounted to £15.4bn in 2022-23 tax year, so a 16% drop in transactions would have a serious dent on Treasury coffers.
When the number of transactions is compared with pre-covid figures, the fall is even starker, from 98,310 in July 2019 to 86,510 in July 2023 based on seasonally adjusted figures. Numbers spiked during the pandemic due to the government’s decision to cut SDLT rates which created a mini boom in property sales exacerbating already over-inflated prices.
‘As aspiring homeowners grapple with the increasing financial burdens of property ownership, it becomes even more daunting to make a move on the property ladder. This lack of first time buyers glues the whole market up,’ added Nixon.
However, some sections of the market are more confident that the property market will remain relatively unscathed despite the base interest rate of 5.5% which has pushed average mortgage rates to 6.75%.
Myron Jobson, senior personal finance analyst at interactive investor, said: ‘There was a significant fall in residential property transactions year-on year whichever way you slice it – down 22% according to the provisional non-seasonally adjusted estimate, or 16% seasonally adjusted.
‘The modest 1% uptick in transaction volumes month-on-month, seasonally adjusted, does not necessarily suggest that the property market is turning. Instead, it shows that there is still a sizeable cohort of buyers who are able to move up the property ladder despite the harsh market conditions.’