The data shows that the number of home purchases completed in January was still very high, likely fuelled by the rush to beat the stamp duty deadline on March 31st.
HMRC also revealed that when non-seasonally adjusted, the estimate of UK residential transactions in January was 98,830, 17.9% higher than January 2020 and 25.2% lower than December 2020.
Anna Clare Harper, chief executive of asset manager SPI Capital, says: "HMRC’s data is important because transactions drive prices and outcomes for homeowners and investors alike. Residential transactions in January 2021 were the highest January transactions totals during the previous 10 years. However, the monthly figure represents a drop off from December 2020 as the housing market starts to calm.
"There have been four major drivers of transactions since the strictest lockdown conditions were removed in 2020: the temporary stamp duty reduction and cheap debt as a result of very low-interest rates, which give buyers a ‘discount’; the release of pent-up supply and demand and desire to improve surroundings among existing homeowners; and the ‘flight to safety’, since in times of uncertainty, people want to put their money in a stable asset with low volatility.
"The temporary stamp duty reduction has had a more than proportionate impact on transactions because buyers can afford much more using mortgages. They can take debt out on the property price, but they cannot use finance to fund transaction costs.
"Looking to the future, when (assuming) the temporary stamp duty reduction ends, we’re likely to see a slowdown in transactions. Challenging economic conditions make potential homebuyers less willing and able to buy. However, at the same time, we are seeing significant growth in appetite from institutional investors such as major global pension funds.
"For investors of any scale, the good news is that throughout market cycles and changes, house prices in the UK have a track record of remaining stable, relative to other property markets internationally and other investments such as shares. In challenging times, house prices will generally slow down, rather than falling significantly, in particular in locations that have good job prospects and amenities. Ultimately, housing has never felt so important as when we’re in lockdown, but throughout market changes, we all need a roof over our heads and supply of new homes is limited."
Tahir Farooqui, CEO of private rental platform Canopy, said: “Transactions may be continuing to rise year-on-year but for many first-time buyers, homeownership is more out of reach than ever. While the stamp duty holiday relieved some of the pressure, it was never a long-term solution and barriers to homeownership still remain. Raising a deposit or securing a mortgage have been made even more difficult due to the pandemic.
“Fortunately renters do have schemes available to them which can support them on their journey to homeownership. One option is Open Banking based rent tracking. On average, a renter would spend nearly £64k before they finally save up to buy their first home. That's equivalent to more than 25% of the average £229k property in the U.K. Now, renters can finally use the rental payments to improve their credit history. A strong credit score is a foundation for financial freedom. When the time arises to obtain a mortgage, a stronger credit score will stand them in better stead.”
