The scale of the housing market slowdown was highlighted yesterday by government figures showing that the number of sales slumped last month.
The Inland Revenue said a total of 112,000 property transactions were registered for stamp duty last month, the lowest level for 14 months.
It marked an 18 per cent fall on December, which is traditionally a quiet month, and almost 30 per cent down on January 2005. The figures follow data from the Land Registry showing that property sales dropped by 24 per cent in the final quarter of last year.
Analysts said it highlighted the impact of the five increases in interest rates between November 2003 and August 2004, which left variable mortgage rates 33 per cent higher in just nine months.
The Royal Institution of Chartered Surveyors said most of the decline in activity occurred in the second half of the last year as households felt the rate rises starting to bite.
"A break in interest rates since the last rise in August has provided a platform of stability which has given greater confidence to prospective buyers," Milan Khatri, a Rics economist, said. "However, further rate increases cannot be ruled out. This would keep market conditions restrained throughout 2005."
Although the fall was dramatic, analysts noted that the Inland Revenue figure related to home sales agreed three and four months previously.
Both Halifax and Nationwide building society recorded small prices falls last autumn. However, since the beginning of the new year there was a stream of figures pointing to an increase in activity. Yesterday Rightmove, a property website, said that a record number of vendors put their homes on the market while asking prices shot up 2.3 per cent.
Rics recently published its own housing market survey for January, showing the first increase in newly agreed sales for nine months, which it said indicated that the low point might have been passed.
Analysts are divided over the robustness of the new year rebound. Some say that consumers' continued willingness to borrow and spend will force the Bank of England to put up interest rates. Others say that it is no more than a traditional new year bounce and that the continued unaffordability of housing, especially for first-time buyers, will dampen the market.Reuse content