Search Acumen comments on HMRC’s latest property transaction data for July

Andrew Lloyd , Managing Director at Search Acumen, says:

“The Prime Minister’s repeated promises of investment in the housing sector may yet bear fruit, but today’s figures have laid bare the scale of the challenge. This week’s pledge of a further £10 billion package for housebuilding is welcome, but perhaps closer to a drop in the ocean than it is a shot in the arm. Indeed, after last month’s stagnant figures, the slight decline of 1% revealed today demonstrates that the market has not escaped this summer entirely unscathed.

“With geopolitical tensions escalating, not least after the US Treasury declared an economic D-Day against Iran whilst fresh trade skirmishes are breaking out, we can expect to see a further squeeze on the UK economy. The Bank of England is clearly doing all it can to avoid raising interest rates, but it may only be a matter of time before the MPC pulls that particular lever so the market will be in for an anxious wait to see which way the decision goes in September.

“Today’s decrease was prefigured by recent ONS statistics, which also report rising rents and house prices for all areas of the UK. As rents increased by 3.7% and house prices were up 2% on average, less well-off areas like the North-East are amongst those hit the hardest. While lower than the peak earlier this year of 4%, house price inflation is still a worrying sign. And in a market where more and more people are struggling to get onto the property ladder the upswing in rents is also a concern.

“This is not good news, but it is also not a reason to panic and forget the property market’s inherent resilience. Property values have taken some serious knocks before, including during the credit crunch and Covid, but bounced back. Despite a poor economic environment, the fact is that the residential market in particular is driven by the engines of real life, and unless families stop growing, people stop relocating for work, and retirement is banned, people will still need to move house.

“The figures are also quite gloomy for the commercial market, resulting in a 2% drop in transactions, but a decline for one or two months is a long way short of being terminal. Commercial investors play a much longer game than homeowners, with larger pools of capital helping to insulate them from economic shocks that would give homebuyers pause. Investor confidence often reflects the wider state of the country’s economy, with today’s figures showing that this is muted, but also that investors are likely keeping their powder dry rather than turning away from the UK market.

“There are still opportunities to be had in the defence sector, along with robotics and drones, and the ever-popular data centre sectors. What’s needed is an injection of momentum to get things going again and inspire confidence across the market.

“Tackling long transaction times would be one route to addressing that lack of confidence. An increased use of data is key to improving transaction speed, helping investors to better model their investment plans, compile all the information needed, and make verification easier.

“In the end, confidence is king and reducing the time it takes to transact, leaving less time for investors to get cold feet, could help drive investment and give the market a much-needed shot in the arm. AI is already helping deliver results in this area, and as the use of technology becomes more widespread, the benefits will also become more apparent.”