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Transaction forecast

1.   Economic uncertainty and mortgage rate volatility mean that there could be just under one million home sales this year, the lowest number since 2012.
2.   Slightly lower mortgage rates in 2024 will encourage some more home moves, but transactions will remain low by historic standards.
3.   Transactions will bounce back in 2025 and 2026, thanks to pent-up demand from 2023 and 2024. But the new normal of higher mortgage rates will limit the numbers.


Uncertainty and volatile mortgage rates have reduced the number of people moving home this year. At the start of 2023, the economy was in a fragile state. Exacerbated by the spiral in mortgage rates that followed the mini-Budget in 2022, transactions had already slowed. However, given the period between an offer being agreed on a home and the completion of its sale is around 3-4 months, the full impact on completions wasn’t felt until the beginning of 2023.

HMRC figures show that there were 555,780 sales in the first seven months of this year, 128,730 (18%) fewer than in the same period of 2022, during the post-Covid boom, and 12% fewer than in the first seven months of 2019.

Since mortgage rates hit a new peak in July, there is unlikely to be a meaningful uptick in transactions in the second half of the year. We think that the total for 2023 will be just under one million. This will be the lowest number of home sales since 2012. But more significantly, it will also be just below the total of 2020 when there were 1.02 million, despite multiple lockdowns.

First-time buyers and downsizers have been the major forces in the market this year. First-time buyers with decent-sized deposits have been climbing onto the ladder to escape higher rents. They have accounted for a record 28% of transactions, buying smaller properties in more affordable areas in response to higher mortgage rates.

Downsizers often prefer to move in a weaker market. They tend to have cash or considerable equity which means that they can exploit the opportunities thrown up by a slowdown. But some earlier downsizers have also been moving to pay off the remainder of their mortgage. These members of the Baby Boomer generation want to free up equity to fund their retirement, but also to help their children - and grandchildren - climb onto the property ladder.


Sound economics is likely to be a central theme of both parties’ general election manifestos. If the election is fought on the centre ground and mortgage rates begin to fall, this should mean an increase in the number of transactions. We forecast a total of 1.1 million for the year.

On the assumption that there are no further significant shocks to the economy, the gradual decline in mortgage rates should encourage more households to plan a move, kickstarting the beginning of a recovery.

Wage growth and a price correction - in real, if not absolute terms - should ease affordability pressures for those trading up or climbing onto the ladder. But higher rates than we have become accustomed to, plus the possibility of political uncertainty, will keep a lid on transaction numbers, reducing the chance of a significant rebound.

Housebuilders too, have been hit by higher rates and the soaring cost of construction materials. This is likely to weigh on the number of new home completions in 2024 as developers slow their build programmes.


Transaction numbers should recover to at least their pre-Covid norm in 2025. We forecast a total of 1.2 million transactions thanks to pent-up demand and lower interest rates. We also forecast that upsizers will drive this recovery. They have been held back by higher mortgage rates which limited their ability to borrow the extra funds needed for a larger home.

Lower mortgage rates and real income growth should also help first-time buyers who have not been able to rely on the Bank of Mum and Dad, or grandparents. And a new housing market cycle set to start in 2025, growing outwards from the capital. In light of this, we think that there will be a bounce in activity across the south of the country.

Contributing to the uplift will be a large number of households that bought a home in London at the peak of the market in 2015/16. Given that the average household moves every 9-10 years, many will be looking to relocate in 2025, although some may have to sell at a loss.


Mortgage rates are likely to settle into their new norm in 2026, further easing affordability pressures. The acceptance that higher rates are here to stay should mean that households who have delayed a move finally decide to go ahead, although a number will continue to be priced-out.

We think that the withdrawal of high loan-to-value (LTV) lending in the wake of the 2008 financial crisis is one of the main reasons why transaction numbers have never recovered to their level at the 2006-07 peak, although two million new homes have been built in England since that time.

Higher mortgage rates are likely to have a similar effect, which is why we think the new normal for transactions is likely to be around 1.2-1.3 million, rather than the 1.3-1.4 million we forecast as the new norm last year. This figure will remain higher than the pre-Covid average because of the increase in household formation.

Developers are under pressure on several fronts. Brexit has shrunk the labour pool, planning applications are increasingly contentious, environmental and fire safetyregulations are becoming progressively tighter and more expensive. A large number of urban schemes with  planning will need to go back to the drawing board to achieve a second staircase. The cost of construction materials has soared,  development finance is hugely more expensive and Help to Buy has ended. It’s safe to say building new homes has never been more difficult or expensive.
Build cost inflation had previously been off set by rising prices for homes. But now, downward pressure on prices is squeezing margins. The fall in the number of off -plan sales and the increasing time to sell a home will force housebuilders to borrow more at higher interest rates - for longer.
The result will be a reduction in output, with some companies already reporting cuts of 30-40%. The Help to Buy scheme which lasted for a decade made it possible for housebuilders to sell a disproportionate number of homes relative to the wider second-hand home market. But the fall in sales of new homes will likely be deeper than that in the wider market over the next couple of years, although demand will be underpinned by ongoing appetite from build-to-rent operators.

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