The number of homes sold in the UK in June dropped by 16.5 per cent compared with the same month last year, as property experts said political uncertainty was affecting confidence among buyers and sellers.
Residential property transactions also fell to 84,490 in June 2019 from 93,520 in May — a drop of nearly 10 per cent, according to data released on Tuesday by HM Revenue & Customs.
Lucian Cook, director of residential research at estate agent Savills, described the data as “the first solid evidence that the backdrop of political and associated economic uncertainty has dented housing market activity, which has held up surprisingly well until now”.
Demand for housing has been weak at the top end of the market in London and the Southeast in recent months. “General uncertainty over UK fortunes and uncertainty over Brexit has impacted prime residential demand,” said Noble Francis, economics director at the Construction Products Association, a trade body. “That has spread to falls in demand in general London housing.”
Mr Francis said some international buyers had held off purchasing in the event that a no-deal Brexit were to cause a slide in sterling, which would allow them to buy at a discount. “You might as well see how far the demand falls before you invest,” he said.
Mr Cook was cautious about drawing strong conclusions from the latest monthly figure, since it could be associated with the “intense uncertainty” created when UK prime minister Theresa May announced her resignation at the end of May. “While housing transactions in the months of June are well down compared with those in the same month a year ago, total transactions in the past year are only 2.5 per cent down on the year to the end of June 2018.”
HMRC said the figures were provisional. After final numbers of completions are received, adjustments can be significant. Neal Hudson, director at Residential Analysts, noted that HMRC reported a drop of 5.8 per cent in May compared with the previous year, but later adjusted that estimate to a gain of 1.7 per cent.
“I don’t want to totally discount the fall,” said Mr Hudson, “but given what happened to last month’s data . . . it’s not immediately clear whether it is a data issue or a market issue.”
He cautioned that other market indicators did not yet support the sharp fall in transaction numbers. “[The drop] would suggest that there’s something quite severe in the market, but I don’t see it coming through that severely in any other data set yet.”
The UK housing market has yet to return to its 2006 peak of more than 140,000 monthly home sales.
Comparable year-on-year declines occurred in April 2017, a year after a spike in sales ahead of the introduction of a stamp duty surcharge on second homes, and in 2009, when a stamp duty “holiday” lifting the minimum threshold for the charge came to an end.
Stamp duty emerged as an issue in the Conservative party leadership contest, as the winning candidate Boris Johnson proposed eliminating it for homes valued at less than £500,000.
Analysts noted the mixed regional picture across the UK housing market. Despite significant drops in demand in more expensive regions such as London and the Southeast, there has been an uplift in number of transactions in the North and West.