House sales slump 17% in September as cost of living continues to bite

House sales slumped 17% in September as buyers continued to feel the squeeze of the cost-of-living crisis, latest data from HMRC revealed yesterday.

HMRC’s quarterly statistics on receipts and transactions for Stamp Duty Land Tax (SDLT) revealed total SDLT transactions in Q3 2023 were 15% higher than in the previous quarter, and 17% lower than in Q3 2022. And while residential property transactions in Q3 2023 were 18% higher than in the previous quarter they were 18% lower than in Q3 2022.

NOT OUT OF THE WOODS

Iain McKenzie, Chief Executive of The Guild of Property Professionals, says: “After a few months of rising sales, a slight fall in September shows the market is not out of the woods yet.

“Although there are signs that the economy is recovering, the reality for many households is that they are still not able to afford to buy in the current climate. Budgets are squeezed and some may have dipped into their deposit savings to get them through the cost-of-living crisis.”

And he adds: “The Autumn Statement could introduce some measures to help Brits get on the property ladder, including an extension of the mortgage guarantee scheme for a further year and potentially another form of help-to-buy scheme.”

Matt Thompson, Head of Sales at Chestertons, says: “Following the Bank of England’s September announcement of interest rates remaining at 5.25%, buyers felt more secure to make financial decisions and resume their property search.

“Understandably, the majority of buyers have been particularly careful about their budget by factoring in any future rate hikes as well as the cost of living.”

FIGURES ARE DATED

And Jeremy Leaf, north London estate agent and a former RICS residential Chairman, says: “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.”

Despite the grim news, Jason Tebb, Chief Executive of OnTheMarket.com, says the market has yet to see ‘a drastic fall-off in transactions’ – regarded as a more useful indicator of the health of the housing market than property prices.

IMPACT ON ACTIVITY

He says: “Numerous interest rate rises have undoubtedly had an impact on activity, fuelling borrower concerns around affordability.

“If the Bank of England holds base rate for the second consecutive meeting, this will give buyer confidence a much-needed boost, particularly as mortgage rates continue to edge downwards.

“While there are motivated buyers out there, they are extremely price-sensitive so sellers must price accordingly if they wish to transact this side of Christmas.”

Mark Tosetti, partnerships director at conveyancing giant Movera, believes that the effects of mounting interest rates in a challenging market are still evident.

“No major surprises in this data with a marginally drop in 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.”

Anthony Codling, Managing Director, RBC Capital Markets, Equity Research and Non-Executive Director of Twindig, says: “It is transaction volumes rather than house prices which have so far felt the chill of the cost-of-living crisis.

“Housing transactions have been stable since June this year, suggesting that homebuyer’s glass is neither half full nor half empty, but finely balanced.

“We suspect homebuyers have their eyes firmly fixed on CPI and mortgage rates and with food inflation at its lowest for 15 months, the scene is being set for upward pressure on Bank Rate and mortgage rates to ease. We are not at a turning point yet, but we suspect we are getting closer.”

And Carl Parker, National Director at Just Mortgages, adds: “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.”