Residential sales in UK down over 40% in March compared to tax change surge a year ago

Property sales in the UK increased by 0.5% increase in March month on month, substantially less than the 40.9% rise recorded in March 2016, but this was due to exceptionally circumstances related to stamp duty change.

The figures published by HMRC also show that non-residential property sales decreased by 3.9% between February and March 2017 but is 3.6% higher compared with the same month last year.

The HMRC report points out that the large year on year drop in residential sales is due to the unusually high transaction count in March 2016 followed by a substantial reduction in April 2016 which was associated with the introduction of an extra 3% stamp duty charge for additional homes.

It also points out that non-tax factors may have caused changes in the property market as well, for example the Bank of England’s plans to curb buy to let mortgages resulting in a rush to purchase before April 2016, and the European Union referendum affecting transactions in the following months.

It should be a warning that while the market is regarded as generally stable there are still uncertainties connected with the Brexit negotiations and now the sudden announcement of a general election in June, according to Andy Knee, chief executive of LMS.

‘Transaction numbers plateaued in the immediate run-up to Theresa May’s declaration of Article 50. Owner occupiers and first time buyers alike waited to see if the declaration would impact the housing market before they set their sights on a new home,’ he said.

‘However, the warning signs for the wider market remain ever present. Inflation rose 0.4% in 2017 and recent LMS data shows the affordability of remortgaging has worsened in the New Year. Home owners looking to purchase their next home should take stock. With a general election and Brexit negotiations likely to throw the market into an uncertain realm, the wisest course of action would be to act now while market conditions are relatively stable,’ he added.

Ishaan Malhi, chief executive officer of online mortgage broker Trussle, believes that there might even be a dip in the run up to the general election as buyers and home owners adopt a wait and see attitude but, as with previous elections, there is usually an increase in activity afterwards.

‘With interest rates still at rock bottom levels for now, I hope that first time buyers and people looking to move home don’t delay their decisions for too long. Locking in a good fixed rate now could potentially save them a lot of money in the long run,’ he added.