Unsurprising fall in transactions

Transactions plummet by 18% in April following the end of the stamp duty holiday, according to the latest LSL Property Services/Academetrics index.

“The sharp fall in transactions in April shows the huge impetus the end of the stamp duty holiday injected into the market,” said Richard Sexton, director of e.surv. “The 32% rise we saw in March has now been replaced by the corresponding fall and the pressure is now on for the government to show schemes like New Buy will be able to make up for the return of stamp duty and drive the market forward.

“Property prices have shown remarkable stability over the last 12 months. Even though the UK entered recession in the first quarter, prices have increased by 0.4% since December and by 1.4% since June. On an annual basis, we’re likely to see price growth return next month as the spike in prices created by the rush to beat last year’s stamp duty hike for properties over £1 million falls out of the figures.

“The market has been supported by strong underlying demand from buyers, who, despite having to clear relatively large hurdles to access mortgage finance, are still anxious to take a step onto the property ladder. Strong underlying demand from buyers pushed transactions in Q1 2012 20% higher than in the same period last year.”

Dr Peter Williams, chairman of Acadametrics, added: “Last month, the main feature of the housing market was the increase in transactions arising from first time buyers who bought properties in advance of the 24th March 2012 ending of the Stamp Duty Land Tax (SDLT) holiday. We calculate that this increased March sales by an additional 4,500 properties over and above normal sales for the time of year. Unsurprisingly, this month the opposite is true, with April sales down by an estimated 11,000 from March, where, in a normal year, they would be the same. Whilst some of the ‘lost’ April sales were those first-time buyer purchases, pulled forward by a month or more to benefit from the SDLT concession, sales volumes are still lower than one might expect, even after taking into account this effect.

“Other factors that came into play in this period were the announcement by some of the larger lenders that they would increase their standard variable rates and reduce lending, and the fact that both unemployment and inflation rose, all of which are likely to have had a negative impact on sales. We will get a better feel for what is happening over the next few months.

“Despite the activity generated by first time buyers in March, price changes have been relatively modest, with the +0.1% increase in the average house price in March followed by a −0.2% decrease in April. In part, this is because on average the price paid for a home in England & Wales still lies within the £125,000-£250,000 tax holiday SDLT banding available to first time buyers. Hence, an increase or decrease in activity within this band will not have significantly altered the average price paid overall.”