Residential property transactions in May dropped by 3.3% on the previous month, following two successive months of growth, in what could be a sign of things to come in the market, as many would-be buyers look set to hold off from buying property until there is greater economic and political certainly.
The UK housing market has slowed, with transactions dropping to 100,170 on a seasonally adjusted basis last month, as investors come to terms with higher stamp duty costs and the heightened economic instability caused by the general election and Brexit talks.
“Staying put is more attractive than ever for borrowers. In addition to the housing shortage, the latest fall in housing transactions is partly because most homeowners are taking advantage of the low interest rates by remortgaging rather than by moving,” said Rob McCoy, product manager of TMA Mortgage Club.
“The range of re-financing options currently available and rock bottom-rates, especially on five-year fixed terms, mean the remortgage market is booming,” he added.
Following a period of gradual decline, some housing commentators are optimistic that property transactions will pick up again in the coming months, while others, such as James Allen, head of Walker Crips Alternative Investments, expect to see a big fall in the next quarter.
“Property transactions show a slight fall this month, but expect to see around three times the deterioration in completed transactions for the next few months,” he said.
The seasonally adjusted transactions for May are 3.3% lower than April, but the only thing remarkable about the latest data is that the seasonally adjusted transaction rate for the 2014, 2015 and 2016 calendar years are all within 0.5% of each other, according to Allen who insists that the transaction data “doesn’t reflect the bleak post-election UK outlook, and shows the danger of averages”.
He continued: “In May we had a huge lead for Theresa May in the opinion polls and we had a clear direction of travel on Brexit. Now we have a fatally weakened Prime Minister unable to pass the Queen’s Speech, and the prospect of a resurgence of UKIP in response to groundswell opposition to a perceived hard Brexit.
“Any market abhors uncertainty and the current political instability was unexpected, leaving the latest data short of time to reflect the new situation.
“I had expected to see property transactions fall in May, reflecting a slight softening of the UK property market. I now expect transactions to fall by 10% or more from the April figure as sellers will be slow to respond to the risk premium that buyers will now price in.”