The number of properties sold in the UK fell by close to 50% in October to hit a nine-year low. This is according to official figures released by HM Revenue and Customs (HMRC). So why the drastic fall in house sales in October? And what can we expect going forward? Let’s take a look.
[top_pitch]
October property sales: what do the stats show?
According to HMRC, the total number of property sales in October (non-seasonally adjusted) was 85,090. This is a 48.4% decline from September’s figure and a 30.1% decline from the figure in October 2020.
It’s also the lowest monthly figure since October 2012.
Why did property sales plummet?
According to HMRC, the major drop in house sales comes on the back of high forestalling on the part of buyers in September. Forestalling is when advanced action is taken to prevent an anticipated event. In the context of housing activity, it refers to people rushing to complete transactions earlier to take advantage of the Stamp Duty holiday before it expired.
The Stamp Duty tax break was introduced by the government back in July 2020 to kick-start the housing market, which had stalled due to lockdown. Under the scheme, buyers did not have to pay stamp duty on properties worth £500,000 or less. As a result, buyers could save up to £15,000 on Stamp Duty when buying a house.
The full Stamp Duty holiday ended on 30 June, after which it entered a transition period. The threshold was reduced to £250,000 before finally returning to normal levels at the end of September.
The end of the Stamp Duty holiday means that the sharp decline in October was not completely unexpected. As Sarah Coles, personal finance analyst at Hargreaves Lansdown, explains, “We always see drops like this after the end of a tax break. The monthly drop looks spectacular, as sales almost halved, but this was from an enormous peak, created by the final stamp duty holiday deadline.
“A major chunk of sales we would otherwise have expected this winter were rushed through in time for the deadline at the end of September.”
[middle_pitch]
What can be expected going forward?
Sales are not expected to pick up immediately.
Aside from the fact that housing activity typically slows down near the end of the year, the number of new properties entering the market is still very low. Research shows that the average agent currently only has 37 properties on their books. So, even if there are buyers willing to buy, there might not be enough inventory.
That being said, the market will not remain dormant indefinitely. After all, the ‘race for space’ is still on, with many people reassessing their living arrangements and looking forward to moving.
Additionally, though mortgage rates are gradually rising, there are still some cheap deals around. Coles reckons that these could be enough to support activity in the market.
Is now a good time to buy a house?
Most experts would say the best time to buy a house is when your finances allow you to do so. However, there are a few compelling reasons why the time between now and Christmas could be an excellent time to take the plunge.
To begin with, Rightmove’s data shows that asking prices fell by 0.6% in November, the largest monthly drop in prices since January.
The fall was attributed to sellers who are desperate to offload their properties before Christmas, pricing them down in order to attract the attention of buyers who might have otherwise put off their purchase plan until the new year.
However, Rightmove says that as soon as Christmas is over, the number of buyers looking for properties is likely to rise. As a result, house prices could start going up again due to increased competition.
So, now could be an excellent time to buy. In addition to potentially scoring a good deal, you might also be able to lock in a cheap mortgage. With the Bank of England likely to raise the base rate in the near future, low-cost mortgage deals could soon disappear from the market.
If you cannot afford to take the plunge right now, the next best thing to do is to continue stacking up your money so that you will be in a strong position to buy if and when a good opportunity presents itself.
