A few months ago, prior to the end of the partial stamp duty holiday, everyone and their dog within the housing market was saying there would inevitably be a tail-off in transaction numbers in October.
Quite rightly, although it was only a small saving on stamp duty, those that could complete before the end of September were obviously going to try and do so. Just as they would have done in March this year if the deadline had held, and of course how they did in June before the full holiday came to an end.
That expectation was baked in and therefore when the HMRC data came through this month, it showed that the number of transactions completed in October was down by about a half on September’s figures. Everyone knew this would happen, everyone predicted it would happen, and everyone said it would be an outlier month not indicative of what might happen next.
And yet for some this signals the start of a housing market apocalypse. ‘We can’t go on like this,’ came the calls, but no-one is expecting this to be a new norm, it’s just a consequence of having that deadline in place, and October just happening to be the month after the deadline has passed.
For what it’s worth, while October was a slower month than you would anticipate in any ‘normal’ year, towards the end of it, our work levels began to increase. October work was broadly in line with what we anticipated, and November has been above.
This leads me to say that anyone worried by the talk of housing Armageddon based on one month’s figures should not pay too much attention and instead should focus on the overall picture. Which happens to still look very positive.
For example, in 2021 we are likely to see in the region of 1.4m-1.5m transactions completed which have clearly been augmented by the increase in demand and the attempts to take advantage of the stamp duty holiday. However, take that incentive out and we still anticipate that 2022 will continue in a strong vein with approximately 1.2m transactions being completed, and we may even touch 1.3m.
This is not bullishness for the sake of it, but demand remains strong. We are still all working our way through the pandemic and what it means for us individually, in terms of what we want and require from our homes, but also in terms of working arrangements and whether our current situation is sustainable.
Evidently, many people have put plans into action because they’ve had the clarity and confidence to do so; others will find that clarity and confidence throughout 2022, which will allow them to literally make their moves. Demand remains strong, and above supply, which perhaps gives you an inkling of what might happen to prices albeit not at the levels we’ve witnessed recently.
The other point to make is around the lending and appetite to lend. Lenders’ activity in pricing has a significant impact, particularly in the remortgage space but also when it comes to purchasing; for example, we have seen prices inch up at lower LTV levels and be cut at higher LTVs. Borrowers and advisers react to that, and while we anticipate purchase activity will remain strong, we also see a resurgence in remortgage business. Good news for the market.
As I write this, we have just one month to go until the end of the year. That’s a deadline that again concentrates the mind, and we are seeing that traditionally push to secure as many completions before Christmas as possible, which again should give December a good send-off from a transactions point of view.
The other catalyst of course will be any move by the Bank of England to increase Bank Base Rate – will it now act, especially with the news of the new COVID variant? We wait to see, but we know if it does this will send the usual ripples and will also instigate activity, particularly from existing borrowers (and their advisers).
Overall, an anticipated fall in transactions during October, is nothing to lose one’s mind over. We knew it was coming and it happened. The future will not be determined by one month and we should not project out a market based on it either, especially when it says very little about the overall strength and what is likely to be another good year for UK property.