Summer slump? Sales and mortgage approvals drop in August

Property sales and mortgage approvals both fell annually in August, official data shows.

Figures from HMRC show UK residential transactions were down 16% annually in August at £87,010, albeit up 1% on July 2023 based on a seasonally-adjusted estimate.

These figures may be out of data though as HMRC highlights they represent completions which are on average two to four months after an initial offer is made on a property.

The latest Bank of England mortgage data, an indicator of future activity, shows approvals were down 8.4% between July and August at 45,354. This is down 37.3% annually and the lowest since February this year.

Agents remain positive though.

Nick Leeming, chairman of Jackson-Stops, said: “At a topline view, residential transactions have continued to rise modestly over the summer months, showing signs of a market that has been quietly boosted by a period of relative stability and resilience for sellers.  

“Whilst these figures are a snapshot of deals agreed likely six months ago or more, the lending market today looks more settled. The wider market hopes that the Bank of England’s recent decision to hold the base rate at 5.25% represents the peak and will therefore offer a boost to the lending market. Positively, mortgage rates are continuing to fall following a turbulent 12 months, now nearing 6% for the average five-year fixed deal. 

“Mortgage rates and inflationary pressures naturally effect consumers appetite for debt in the shorter term, but the property market is not solely driven by financial decisions. Lifestyle and needs-based changes are a continually strong motivator of property purchases at all levels of the market. Often, the rules of supply and demand are taking precedent over macroeconomics. This means there is a catalogue of market nuances up and down the country, not least proximity to schools and the coast, creating pockets of market immunity

Iain McKenzie, chief executive of The Guild of Property Professionals, said: “Estate agents have been enticing more sellers onto the market to give more choice to buyers when it comes to finding the right property.

“The annual picture still shows a significant drop off in sales at 16%, but nothing different to what we were forecasting at the start of the year. If anything, our predictions of an overall fall of 20% for 2023 may even be revised thanks to the consecutive months of increases we have seen.”

He said the affordability factor will remain a stumbling block for buyers during the rest of the year, adding: “Sellers can be reassured that there is still a healthy demand for good quality housing, especially among first-time buyers looking to escape the expensive rental market. There may be more flexibility required in the asking price  than there was last year but your local estate agent will be able to advise you on what to expect in your area.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: “Transactions are always a better barometer of market health than prices. Although a little dated, these numbers clearly demonstrate a determination to proceed with home moves. 

“Clearly numbers are lower than this time last year but they are certainly not falling off a cliff and expectations that mortgage rates and inflation may be at or near their peak is helping to generate more activity. 

“The rising cost of living, and especially mortgages, has stretched affordability but hopefully now it’s at its maximum, which is a view held by many of our buyers and sellers."