September Marks Bleakest Month for Property Market in Ten Years

In September, the property market witnessed a significant downturn, with sales plunging to their lowest in a decade. The seasonally adjusted property sales stood at 85,610, marking a 17% decline compared to the previous year and a 1% dip from August figures. This slump is the first observed since May and underscores the impact of escalating mortgage rates since spring.

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, remarked, “The worst September in a decade reflects how tough the property market was in the summer, when mortgage rates were surging again. Despite a slight relaxation, the sense of pessimism enveloping the market has not substantially receded. The statistics mirror transactions agreed upon in the summer when apprehensions regarding persistent inflation led to anticipation of further rate hikes. This pushed two-year fixed rates to a recent zenith of 6.85% at the beginning of August. Consequently, numerous buyers were either priced out or dissuaded from committing during such turbulent times.”

Coles further noted that although mortgage rates have somewhat retreated since, they still remain considerably higher than figures recorded in early spring. She added, “RICS figures for September showed buyer numbers and sales completions were both falling, while Zoopla’s figures this week showed house prices down 1.1% – the sharpest year-on-year fall in price growth since 2009. It appears that a more substantial decline in mortgage rates may be necessary to dispel the gloom pervading the property market, with no such change anticipated until well into 2024.”

Terry Woodley, MD of Development Finance at Shawbrook, shed light on the economic challenges and elevated interest rates as contributing factors to the diminished property transactions. He stated, “Rising costs will continue to be a hurdle for developers, with two-in-five stating this as their main concern according to our latest research. As a result, 96% have had to make changes to their business strategy over the past year. Developers are keen on expediting project completions to counterbalance the repercussions of soaring costs and waning demand.”

Woodley also pointed out that many developers are exploring diversification options to safeguard their businesses against the current market fluctuations. He revealed, “Our research also found that hospitality and leisure developments were the highest priority for developers, followed closely by new build city flats, student accommodation and high street retail units, indicating a shift away from private housing developments in response to the prevailing market conditions.”

HMRC has released details of property transactions in September: UK monthly property transactions commentary – GOV.UK (www.gov.uk)