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A lower activity environment
There is a close link between home values and transactions volumes. It’s rare to see a dip in values without a corresponding fall in activity. Alongside a fall in values next year, we also expect a sharp fall in activity, with transactions only recovering back towards pre pandemic levels from 2025 onwards.
In 2023 we expect limited mortgage product availability, along with high rates and stretched affordability to mean activity falls to a little under three quarters of the levels seen pre-pandemic. While activity will slow, we expect transactions to remain comfortably above the 740,000 sales seen when they last bottomed out after the Global Financial Crisis.
Recovery will then vary according to buyer type, with cash buyers and home movers the first to recover, followed by first time buyers and mortgaged buy-to-let investors. Looking longer term, we expect activity to plateau at around 1.1m transactions a year. This is slightly lower than the pre-Covid figure of about 1.2m, due to the higher underlying interest rate environment, with buyers weighted towards more affluent households even after a correction in values.
