Transaction levels were broadly flat when compared with a month earlier, the latest figures from HMRC revealed. with competed deals edging up by just 1%.
On a non-seasonally adjusted basis, there were 86,190 residential transactions, down 22% year-on-year and a 9% monthly decrease.
Frances McDonald, director of research at Savills, commented: “The UK property market held up stronger than expected in July. Completed transactions edged back up to 86% of their 2017-19 average for the month, on a seasonally adjusted basis. This represents an improvement on the 84% and 81% comparisons seen in June and May. Despite higher mortgage rates, activity levels have remained relatively robust so far in 2023, in part thanks higher numbers of cash buyers.
“With all signs indicating that the Bank of England base rate looks to be at, or very close to its peak, some of the affordability pressures should ease, bringing greater certainty back to the housing market in the coming months.
“The data also tallies with agreed sales data for the first 7 months of the year (only -8.4% below the 2018-19 average for the same period according to TwentyCi) highlighting that the market has become more driven by cash and equity rich buyers. This means that established prime markets most synonymous with these buyers will likely continue to be some of the strongest performers over the coming months.”
Jeremy Leaf, north London estate, said: “Transactions, which constitute a better barometer of market strength than prices, have held up better than expected considering concerns over rising interest rates in particular.
“But it’s too early to put the flags out just yet as these numbers are quite historic and reflect buying decisions made several months ago. Buyers, especially the cash and equity rich, seem determined to get deals over the line so we are seeing fewer fall-throughs. On the other hand, the number of people on holiday is not helping to reduce the time it takes to exchange contracts.”
Nick Leeming, chairman of Jackson-Stops, said: “A further step up in completed transactions for July feels like a hot summer streak when you consider that 2023 began with uncertainty and hesitation. Activity may be down year-on-year, but it’s still within touching distance of the numbers seen throughout the mid-2010s, despite the low interest rate environment being firmly in the rear view mirror.
“Mortgage rates are slowly heading back in the right direction and, while rate cuts have been incremental, borrowers will be relieved and have a chance to catch their breath following a turbulent 12 months.
“It’s important to remember the property market is not wholly determined by mortgage rates; the market is cyclical and while there may be slower periods, a lack of stock and a continual demand will help to avoid a completion cliff edge. Cash buyers and right sizers have both benefited from strong house price growth in recent years and are now able to make their moves relatively unaffected by a temperamental lending environment.
“Heading into Autumn we expect housing is likely to be a defining topic of conversation at the political party conferences and expect it to be central to the major parties’ long-term strategies. Reforms to planning, greater devolution to local councils and green energy infrastructure are all important topics of conversation for Sunak and Starmer to address to give homebuyers confidence that a brighter future lies ahead.”
Nicky Stevenson, MD at Fine & Country, commented: “Property transactions were stable in July, rising slightly compared to June on a seasonally-adjusted basis.
“Affordability pressures caused by successive base rate rises are squeezing demand compared to last year, but the housing market is proving resilient.
“Buyers have become used to the higher-rate lending environment, and many sellers are pricing their properties accordingly. Sensibly priced properties continue to attract a lot of interest, while smaller homes in affordable locations are proving the most popular.
“A pause in base rate rises would stabilise mortgages and inject even more confidence into the property market.
“Hopefully we are soon reaching the point where the Bank of England can take a step back from interest rate hikes and let the economy recover of its own accord without needing to pull another lever.”
Alex Lyle, director of Antony Roberts, said: “A combination of the summer holiday season and buyers being more cautious has resulted in fewer viewings. Having said that, the recent volume of agreed sales has been reassuring and those properties that have come to market or are getting ready to launch in September appear to be committed vendors with an understand of current market conditions.
“Prime addresses and in particular family houses continue to attract significant interest and are achieving strong prices. Properties that maybe compromised in terms of location or lease, or layout, are taking longer to sell and it is these properties that need to be competitively priced.”
Andy Sommerville, director at Search Acumen, commented: “Year-on-year we’re now seeing reductions in transaction volumes across residential and commercial markets. Despite some progress being made in the battle against inflation in recent months, living and operational costs still remain very high by historic standards, as does the cost of borrowing. It is unavoidable that these dynamics will impact demand and pricing.
“This marks a significant recalibration of the market dynamics that prevailed in the decade preceding the Pandemic. In the housing market, we are looking at a period of reduced market activity until house prices, real income and borrowing costs come into better balance. In the commercial markets, we will see investors reassessing their portfolios, looking for sectors that are capable of outperforming all property benchmarks in the current conditions.
“In this market, everyone is on high alert for a competitive advantage, whether that’s house hunters trying to get the most for their money, or commercial portfolio managers trying to identify asset classes that could buck the general trend. Technology and data are crucial tools that can give homeowners and real estate professionals that edge, and those that succeed will do so because of the data they have available to them to inform decision making along with their ability to drive efficiencies through digital transformation.”
Gareth Lewis, managing director of MT Finance, said: “There is some hesitancy as to whether now is a good time to buy while there is uncertainty as to where interest rates will peak and what will happen with property values.
“As we’ve been saying for a while now, we need some stability in order to give buyers and sellers confidence. The volatility of the past few months, combined with soaring living costs, are extremely unhelpful to the smooth functioning of the market.”
Kevin Roberts, MD, Legal & General Mortgage Services, said: “Whether buying or remortgaging, the UK housing market has clearly seen a quieter period over the summer, with consumers choosing to sit tight and take a ‘wait and see’ approach. This contrasts against the urgency we saw earlier this year as borrowers raced to lock into new deals in a market of rising rates. However, we expect this pause in activity will likely be short-lived as a more stable market shapes new norms, encouraging buyers to make a move onto or up the housing ladder, and existing borrowers to remortgage as their deals expire.
“As activity picks up, many will need ample reassurance that they are making the right choices about their mortgage, as well as those gifting to loved ones as part of the Bank of Family. In these challenging times nobody has a ‘crystal ball’, but advisers have a golden opportunity to add value by offering professional guidance to help their customers make informed decisions.”
Nigel Bishop of Recoco Property Search, said: “Although July’s market activity doesn’t quite compare to that of July 2022, we are still seeing buyers who are determined to find a property as soon as possible. The current market is particularly driven by cash buyers who are not faced by higher interest rates but we have seen some house hunters adjusting their budget or search criteria in order to find a suitable property.
“Sellers who are eager to part from their property are more open to price negotiations than this time last year but buyers need to take into account that the pool of countryside properties is generally smaller, which limits the size of achievable price reductions outside the city.”
Mark Harris, chief executive of SPF Private Clients, remarked: “Transaction numbers have slipped in the face of higher interest rates and the cost of living, as borrowers reassess what they can afford to pay.
“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.
“Lenders continue to tweak their fixed-rate mortgages downwards so borrowers will be hoping that other lenders follow suit, with the worst of the rate rises behind us.”
Anna Clare Harper, CEO of GreenResi, added: ‘‘Housing transactions were down 16% in the year to July 2023, reflecting weaker confidence and demand, but fears of a house price crash are thought to be over-blown.
“Higher interest rates have made buying and owning property much less affordable. Up to 2 million property owners are facing double or triple their previous housing costs by the end of this year. Some will seek a fast exit at any price, limiting overall house-price growth, and causing price reductions in some areas. New purchasers relying on mortgages are no longer able to pay 2022 prices. Only cash owners or purchasers are not directly affected.
“However, outright home ownership of homes with no mortgage is the largest – and luckiest – group of property owners. 8.8 million [36%] homes in England are owned outright, and these households are unaffected by mortgage interest rates. For this reason, although there are deals to be had, fears of a full-scale house price crash are not realistic.”