In our previous post, we discussed the cost of lockdown to the property sector, our Exchanges data suggests that the industry missed out on around 60,000 property transactions so far this year.
Whilst this equates to around £137m in Estate Agent commission, our prediction of 60,000 property transactions lost, is far lower than any other industry commentator.
HMRC has continued to publish its monthly transaction figures and lot of commentators rely on them for their own commentaries. In June 2020, HMRC suggested there were around 68,670 UK residential property transactions of £40k and above. This suggests a drop of 32% YoY but a rise of 50% compared to May 2020.
However, HMRC always marks its last 3 months of figures as ‘provisional’. They are generally lower at first and then revised upwards in the following months. June 2019’s figure was nearly 17% lower when it was first release in July 2019 compared to the revised figure in August 2019.
We can therefore assume that the number of transactions in June 2020 will in fact be closer to around 73,900. Still approximately a 26% drop but on a positive note it does show a faster rebound with a 61% increase compared to May 2020.
So, what does H1 2020 look like, once we’ve added our revised figure?
This shows the extent to which the number of transactions has risen from lockdown in April and May, where there was a 23% increase, to June with a 61% increase.
Assuming the adjustment in the number of transactions in June 2020 will occur as it did last year, the number of lost property exchanges is likely to be around 130,000 in H1 2020 compared with H1 2019. This would be an exceptional result compared to what most of the market commentator expect.
The next obvious question is how will the rest of the year will perform?
We have no crystal ball, but we do have access to a number of indicators to help guide our thought process. We know that:
The market may slow down but based on our points above it looks unlikely. If the market hasn’t returned to 2019 levels by the end of July 2020, you can probably bet it will by the end of August 2020.
If this does indeed occur, H2 2020 will see around 629,000 transactions. Adding that figure to the 410,000 transactions from H1, gives a total of 1,039,000 transactions in 2020. In 2019 we saw 1,177,000 transactions, so that’s a loss of 138,000 sales or a drop of 12% this year. Again, an exceptional outcome for the UK property industry and the wider economy.
This is of course an educated guess based on what we know today, and things could change. We still don’t know how property sales will be impacted once the furlough scheme stops in October. Will there be further rises in unemployment? Or will house prices start to fall, leading to tighter mortgage lending rules?
Only time will tell.