"Apart from last month, it was the highest number of completed purchases in any month since the race towards the March 2016 stamp duty deadline."
On a non-seasonally adjusted basis, transactions totalled 98,830, 17.9% higher than January 2020 and 25.2% lower than December 2020.
Mike Scott, chief analyst at estate agency Yopa, commented: "New figures from HMRC show that the number of home purchases completed in January was still very high, as buyers rushed to beat the 31 March stamp duty deadline. The (seasonally adjusted) number of purchases was 2.4% lower than in December, but 24.1% higher than in January 2020, which was itself a quite active month. Apart from last month, it was the highest number of completed purchases in any month since the race towards the March 2016 stamp duty deadline.
"We expect that the number of purchases will remain very high until March, and then drop off for a few months before returning to normal. The year as a whole is likely to see a higher number of purchases than in recent years, perhaps as high as 1.3 million. The housing market has remained open during the recent and current lockdowns, but many people are still waiting for life to return closer to normal before they make their next move. After a brief slowdown in the second quarter after the stamp duty holiday ends, we anticipate a very active housing market in the second half of this year."
Anna Clare Harper, chief executive of asset manager SPI Capital, added: "Residential transactions in January 2021 were the highest January transactions totals during the previous 10 years. However, the monthly figure represents a drop off from December 2020 as the housing market starts to calm.
"There’s been four major drivers of transactions since the strictest lockdown conditions were removed in 2020: the temporary stamp duty reduction and cheap debt as a result of very low interest rates, which give buyers a ‘discount’; the release of pent-up supply and demand and desire to improve surroundings among existing homeowners; and the ‘flight to safety’, since in times of uncertainty, people want to put their money in a stable asset with low volatility.
"The temporary stamp duty reduction has had a more than proportionate impact on transactions, because buyers can afford much more using mortgages. They can take debt out on the property price, but they cannot use finance to fund transaction costs.
"Looking to the future, when (assuming) the temporary stamp duty reduction ends, we’re likely to see a slowdown in transactions. Challenging economic conditions make potential homebuyers less willing and able to buy. However, at the same time we are seeing significant growth in appetite from institutional investors such as major global pension funds.
"For investors of any scale, the good news is that throughout market cycles and changes, house prices in the UK have a track record of remaining stable, relative to other property markets internationally and other investments such as shares. In challenging times, house prices will generally slow down, rather than falling significantly, in particular in locations which have good job prospects and amenities. Ultimately, housing has never felt so important as when we’re in lockdown, but throughout market changes, we all need a roof over our heads and supply of new homes is limited."
