Property sales: Worst February in a decade and more weakness on the way

Sarah Coles, head of personal finance at Hargreaves Lansdown, comments on the publication of HMRC monthly property sales for February, showing worst February in a decade and more weakness on the way.

Key points from publication:

• • Property sales (non-seasonally adjusted) were up 2% from January, to 76,920. However, this is down almost a fifth from a year earlier (18%).
  • When they’re seasonally adjusted, things look even worse – with transactions down 18% in a year and 4% since January.
  • On both a seasonally adjusted, and non-seasonally adjusted basis, this is the slowest February in a decade.

Sarah Coles says:

“Mini-budget misery crashed property sales at the start of this year. They plummeted in January, and on a seasonally adjusted basis, they fell again in February.

“They’re the worst February figures in a decade. However, we don’t yet know whether this is a brief and brutal shock, or the beginning of a miserable period for the property market.

“We’re not expecting things to pick up much in the next couple of months. Earlier this month, the RICS Residential Market Survey charted its tenth month of falling buyer numbers, and eighth month of falling agreed sales.

“It also said that sales are now taking almost 19 weeks, as recalcitrant buyers drag their feet.

“Because of the lag in the market, this is likely to mean depressed completions through the spring and into the summer.

“The question is whether we get the usual pick up in agreed sales this summer, and the jury is still out.

“Any optimism is based on mortgage rates dropping even further, helping with both affordability and confidence levels from buyers. However, this makes two assumptions that are far from foregone conclusions.

“The path of interest rates from the Bank of England is increasingly difficult to predict, as it wrestles with the opposing forces of inflation and concern over the impact of higher rates on the banking sector.

“We have seen some big lenders cut their rates, and this week we may get a pause in hikes from the central bank, which could help on that front. However, this is not necessarily the end of the rate hiking cycle.

“If inflation remains sticky and the banking sector settles, mortgage rates may not be on a smooth path downwards.

“Even if they do drop back, the question is whether it will be enough to overcome the uncertainty that has rocked the market since the autumn, and done so much damage to buyer confidence.  

“On balance, we’re still expecting a considerably weaker period for sales, and for prices to drop back this year.

“There’s just a better chance that we might not see the scale of price drops that were predicted at the start of 2023.”

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay