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

Andrew Lloyd , Managing Director at Search Acumen, says:

“Those who have been lamenting the absence of a spring bounce will continue to see today’s unremarkable transaction figures as evidence of a lacklustre housing market. Today’s August transaction figures, down 2% annually, show an unseasonal low, as August has historically been a buoyant month for deal completions. But while this is a decline, against an uncertain economic backdrop with a question mark over interest rates and a pending Budget, another interpretation is show of continued resilience. Data continues to suggest home buyers are pushing forward in their droves, accepting perhaps that economic uncertainty may be our new normal.  

“In the residential market, the sharp 20% price reductions we’re seeing in some parts of London could go some way to explaining the fall in deal volumes. London will also bear the brunt of Mansion Tax, where around 60% of the £1.5m+ properties are in the capital. It could prompt many homeowners to reassess their situation, spurring a wave of activity at the upper end of the market as some seek to get ahead of any changes. That may boost transaction volumes in the short term, but not necessarily for the reasons policymakers would hope.

“Alongside an altogether more fragmented residential market, the commercial market is also struggling to keep up, down roughly 1% annually. While some concerns about increased debt have likely been tempered by strong fundamentals in several key sectors, key questions about sustained growth remain. Winning streaks are there: industrial and retail assets recorded annual income and rental growth of 4.3% and 8.4% respectively, while public sector land and asset sales, coupled with new acquisitions, have supported transaction activity across a range of firms. But it’s clear that, in the bigger picture, the UK continues to struggle near the bottom of the G7 in long-term productivity and business investment, while facing mounting pressures in our labour market.

“Rhetoric of ‘growth in every postcode’ and ‘industrialisation’ is overshadowed by the upcoming Autumn Budget, predicted to raise Capital Gains Tax among others. We might see a rise in transactions for all the wrong reasons if this happens, where owners seek to sell assets before a tax deadline, after which transactions tend to fall off a cliff. The power of trial ballooning and harmful tax policy can make or break a sector. We’ve seen previous Chancellors talk of doom and gloom become a self-fulfilling prophecy, where fear and hesitation are often more damaging than the changes themselves. At present, the Treasury is attempting to show restraint. So, at least for now, figures show that positivity rather than nervous inertia is the prevailing mood. Let’s hope the Budget unlocks growth in all the right ways.”