Recent HMRC data points to a subdued environment for both residential and commercial transactions – raising questions not only about housing supply, but also about wider economic implications.

Heather Powell, Head of Property & Construction comments:

The latest property statistics published by HMRC are bad news for the Government’s target of 1.5m new homes. They show a stagnant market with low appetite for buying, which means there is no motivation for builders to build.

Policy ambition meets market reality

The Government’s housing target is rooted in a longstanding need to address undersupply and affordability challenges. However, housing delivery is not driven by policy targets alone – it depends heavily on market conditions. Developers build when they are confident homes will sell at viable prices. Without sufficient buyer demand, even well-intentioned policy frameworks struggle to translate into tangible outcomes.

Property sales continue to be steady. There has been no major increase in the number of residential or commercial properties sold per year in comparison to the last three years. A huge injection of confidence is required to end the market’s stagnation, but the Chancellor, Rachel Reeves, seems to be bereft of ideas on how to generate this.

This disconnect highlights a critical policy gap: while supply-side targets remain ambitious, demand-side conditions are not aligned to support them.

Why demand is subdued

This continued stagnation is not surprising. People are worried about the cost of living, job security and the cost of a mortgage and so are not rushing into home ownership – or stepping up the housing ladder.

Commercial investors, the buyers of offices, factories and similar buildings have similar concerns – will tenants be found, will they be able to pay the rent, and will the rent received cover interest charged by lenders?

These factors combine to create a cautious, wait-and-see environment – one that dampens transaction volumes and, in turn, discourages new development.

Fiscal implications for the Treasury

A stagnant property market does not just affect housing supply; it also has direct consequences for public finances. Property transactions generate a range of tax revenues, from Stamp Duty Land Tax (SDLT) to VAT on associated spending such as renovations and moving services.

The Chancellor is going to have to reflect on the impact this will have on Stamp Duty Land Tax (SDLT) receipts, as well as all of the taxes that are collected as a result of property moves – VAT on move costs and refurbishment and taxes payable by the businesses selling to the new property owner.

Lower transaction volumes mean reduced tax intake, which could constrain the Government’s fiscal flexibility at a time when public spending pressures remain high.

Short-term outlook: limited catalysts for change

While there are seasonal fluctuations such as increased activity in spring and summer, these are unlikely to shift the overall trajectory of the market.

Heather concludes:

HMRC’s statistics highlighted an increase in the number of sales in March compared to February, which reflects the annual trend as the UK moves into the summer months. But property prices are unlikely to increase significantly over the next twelve months, so buyers will not rush to purchase a property.

In other words, modest short-term improvements are not expected to translate into a sustained recovery. Without a stronger catalyst, such as improved affordability, lower borrowing costs, or targeted policy intervention – the market is likely to remain subdued.

What this means for businesses and individuals

For businesses operating in or adjacent to the property sector – developers, construction firms, estate agents, and professional services providers the current environment presents both risks and strategic considerations. Slower transaction volumes may impact revenues, while uncertainty could delay investment decisions.

For individuals, the market offers a mixed picture. While stable or slow-growing house prices may improve affordability for some buyers, ongoing economic uncertainty continues to weigh on confidence and decision-making.

What you should consider next

Assess market timing carefully: Buyers and investors should weigh the benefits of stable pricing against broader economic uncertainty and financing costs.

Review financing strategies: With borrowing costs still a concern, exploring alternative financing structures or refinancing options may be prudent.

Plan for slower activity: Businesses linked to property transactions should prepare for continued subdued volumes and adjust forecasts accordingly.

Monitor policy developments: Any government intervention aimed at stimulating demand, such as SDLT adjustments or buyer incentives could shift market dynamics.

Focus on resilience and flexibility: In a low-growth environment, operational efficiency and adaptability will be key to maintaining performance.

Would you like to know more?

If you’d like to discuss the above, please speak to your usual Blick Rothenberg contact or Heather Powell using the form below.