Posted on 21 July 2017 by
HMRC has today published statistics for June’s property transactions and so we now have totals for the first half of 2017.
Figures for the second quarter of each of the last 3 years are as follows:
and figures for the first half of the last 3 years are as follows:
As the figures for the first half of 2016 were massively distorted, particularly in March, by the 3% stamp duty surcharge starting on 1st April that year, a comparison with 2015 is more helpful than the usual year on year comparison.
On that basis, as can be seen from the above figures, although the 2017 April – June transaction numbers were marginally lower than 2015’s the stronger first quarter resulted in the 2017 half year transaction numbers being 3.4% higher than in 2015.
Although much of the distorting effect of the 3% stamp duty surcharge would have worn off by the middle of last year the reduction in BTL purchase activity has continued and so it is arguable as to whether 2015 or 2016 will be a more valid comparison when assessing the 2017 numbers. However, to the extent that any Brexit induced uncertainty last year will still be relevant my inclination is that in for the second half of this year the normal year on year comparison will be more appropriate.
Transactions in the second half of 2016 were lower than in 2015 in every single month (as well as every month in the second quarter), with the 2016 total for the second half of the year being 629,560, compared with 682,260 in 2015, a drop of 7.7%.
After bottoming out at 859,000 in 2009, just over half the peak of 1,671,000 hit only 3 years earlier, transactions appear to have broadly stabilised at around 1.25m, with the number for the last 3 years being:
My original forecast of a fall to 1,150,000 in 2017 now looks on the low side, with the final numbers likely to be close to the figures for the last 3 years.
With the new normal over 25% lower than the peak number hit 10 years ago, since when the population has increased significantly, the Government, Bank of England and The Financial Conduct Authority should all try to identify the key reasons for this and the extent to which their actions have contributed to it. Only with a robust assessment of the reasons for the decline in activity can proper consideration be given to what, if any, actions would help to increase activity.
For example, has stamp duty, particularly at the top end, increased to such an extent that more revenue would be raised if some rates were reduced, as a result of an increase in the number of transactions, particularly with the consequence that chains will be easier to complete? Even if a rate cut only resulted in revenue from stamp duty being broadly maintained, rather than increased, the increase in transactions would still provide a useful boost to economic activity and hence other tax revenue, such as VAT.
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