Property prices and transactions are up but ‘it is unlikely that this rosy picture will continue’

The figures from HMRC this week revealed that the number of residential property transactions in the UK increased by 9.8% between September and October to hit 105,630, up 8.1% year-on-year.

On a non-seasonally adjusted basis, the number of residential transactions is 13.7% higher than October 2019 and 23.7% higher than September, which is welcome news, but this upward trend looks unlikely to continue.

Transactions are expected to fall as the temporary boost in market activity levels from Rishi Sunak’s stamp duty holiday draws to an end.

Heather Powell, head of property at Blick Rothenberg, is among those who thinks the housing market will slow in the coming months.

Powell said: “Home buyers need to ensure that they buy for the long term, and make sure they don’t get carried away by the excitement in the housing market triggered by the short-term stamp duty holiday.”

Strong demand for property is placing upward pressure on residential property prices, which hit a record high average of £250,457 in October, according to Halifax.

The Halifax House Price Index, published earlier this month, showed prices in the latest quarter – August to October – were 4% higher than in the preceding three months.

Property prices in October were also 7.5% higher than in the corresponding month last year, the strongest growth since June 2016, Halifax said.

Powell continued: “The sharp rise in prices has been linked to the stamp duty holiday announced this summer and the pent-up demand released in June when the country was released from lockdown.”

But month-on-month price growth slowed considerably, down to 0.3% in October, compared with 1.5% in September.

Powell, like many property professionals, now thinks that the likely drop in the demand for housing next year will result in a fall in property prices.

The Office for Budget Responsibility has warned that recent property price gains would be reversed next year with prices falling by more than 8%.

Powell pointed out that the average house price in England is now more than seven times the average English salary and in London it is over 13 times the average salary.

She added: “The need for good, affordable housing is well known, but these statistics show how much the property being delivered to the market lags behind the political rhetoric.

“The number of mortgage approvals in September were 91,500, the highest since September 2007 and an indication that we are unlikely to see a fall in house prices in the immediate future.

“It is unlikely that this rosy picture will continue beyond March 2021 though.  31 March 2021 see the end of the stamp duty holiday and the withdrawal of support for businesses, and their employees, will be making companies look closely at their forecasts – and employee numbers.

“I predict a significant fall in demand for houses, with lower transactions, and, for those who have to sell their home, reduced values.  If job losses start hitting homeowners then house sales, forced by mortgage lenders, could drive prices down significantly.”

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