UK house price

HMRC data: No sign of a slowdown for UK property market

Owning property remains a ‘safe’ option despite current economic challenges, and the latest UK property market transaction figures show the buoyancy of the sector.

HMRC‘s official transaction data for May 2022 displays the ongoing strength of the UK property market, with a 1.6% increase in completed sales since April 2022’s figures. Residential property transactions in the month totalled 100,870, which is slightly lower (2.0%) than one year ago.

This is despite the obvious political and economic headwinds, including budget squeezes due to the rising cost of living, and increasing interest rates. According to Nick Leeming, chairman of Jackson-Stops, the market is showing “no real signs of slowing”.

He adds: “Momentum has yet to run its course. By historic standards, borrowing remains cheap and today’s interest rate of 1.25% is still far lower than the historic average of 7% between 1970 and 2022.

House prices continue to show growth month on month, albeit at a gentler rate than the record boom of the last 6 months. While the going is good, people are moving.”

UK property market less volatile

Since the start of the pandemic – and historically – owning bricks and mortar in the UK has been a popular way of keeping assets safe. For overseas investors, too, the UK property market is often see as a “safe haven”, with a limited amount of stock and extremely high demand.

Despite a slight cooling off in the quantity of transactions this year compared to last year, appetite is certainly still there with no major fall back on the horizon according to industry experts.

Anna Clare Harper, director of real estate technology platform IMMO, said: “Housing transactions are important because they drive house prices, which both reflect and affect our confidence, and the economy.

“Homeowners and investors alike feel safe owning residential property, since it tends to hold its value well through times of uncertainty and risk, as we are in.”

Look at transactions, not just prices

For those looking to invest in the UK property market, extensive research is advised before you commit. This could involve looking at house price data in particular locations, as well as things like upcoming regeneration and infrastructure improvements.

Further to this, positive transaction data can be a good indication of the general confidence in the market.

Jeremy Leaf, north London estate agent and former RICS residential chairman, said: “Transactions, which are probably a better measure of market health than more volatile prices, are often the last to reflect change.

“The protracted period between the date a sale is agreed and completion means we can wait several months to notice something is up.

“Previous falls in sale numbers could partly have been blamed on shortage of stock but we are now finding, at the sharp end, a softening in demand prompted principally by the rise in inflation, as well as uncertainty as to when it will end.

“That lack of choice, combined with low unemployment and rising wages, mean no major corrections are expected.”

Will affordability pose a problem?

The cost of living crisis is affecting growing numbers of people across the UK. Whether this could begin to affect prices in the UK property market, as people’s budgets reduce, remains to be seen, but Nick Leeming expects high demand to keep values afloat.

He added “It would be unrealistic to anticipate affordability factors not having an impact on the housing market in the coming months.

“By the year end, it’s been widely accepted that interest rates will grow to 3% and inflation to 11%, seeing those homeowners on tracker and variable mortgages hardest hit.

“Interestingly, rumours of tighter affordability testing have been recently quashed suggesting the government is keen to do all it can to support property transaction growth. Although house prices will remain resilient into 2023, it will be the lending market that will likely dictate the fortunes of many.

“Whilst higher interest rates are likely to rein in housing demand, more supply is needed to even out the scales and keep transactions buoyant. This is not just in the form of new build properties but also encouraging the sale of under-occupied houses by supporting downsizers and the rising costs of moving.”

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