The number of houses sold in the UK fell by 1% last year, according to figures from HM Revenue & Customs (HMRC).

Just 869,000 homes changed hands in 2011, 11,000 fewer than the previous year and one of the lowest numbers since modern records began in 1978. Some 1,669,000 homes were sold in 2006.

Analysts blamed strict rationing of mortgage lending, rising unemployment and falling real incomes for the drop in the number of completions. Many first-time buyers are finding themselves locked out of the housing market by nervous lenders demanding deposits of at least 20% and an impeccable credit history.

Last year’s house sales were only just above the 848,000 properties sold in 2009, the fewest exchanged in a 12 month period on record. House sales had started to recover in 2010 when transactions rallied slightly to 880,000.

Geoff Meen, professor of economics at the University of Reading, said, ‘If you have very poor levels of credit availability, for first-time buyers and people moving home, you are going to get low levels of sales taking place,’ he said.

‘You would expect low levels of transactions taking place in any recession as well. Given we have very low levels of new construction activity, new transactions reflect sales of new dwellings, so if you have got low starts and completions you are going to get low transactions as well.’

The Council of Mortgage Lenders (CML) predicts that although total mortgage lending rose last year, the perilous state of the economy and the eurozone crisis could cause it fall back this year. Estimated lending totalled £140 billion in 2011, up 3% from the £136 billion advanced in 2010.

CML chief economist Bob Pannell said, ‘The closing months of 2011 saw stronger mortgage lending activity and housing transactions, despite the fact that short term economic prospects are challenging.

‘There is a glimmer of light ahead for households in that real incomes could stabilise and perhaps even start rising by the end of the year. But, continuing eurozone problems mean that mortgage funding prospects are uncertain, so overall UK mortgage market conditions for the year ahead remain difficult to call.’

The Bank of England has said it expects mortgage lenders to tighten their lending criteria further this year, making it even harder for people to get a mortgage. New regulations designed to stop lenders reverting to the type of behaviour that caused the banking crisis will be introduced by the Financial Services Authority in 2013, which is also likely to have a negative effect on gross mortgage lending.

Adrian Coles, of the Building Society Association, said the fall in the number of house sales could be permanent, ‘This is not just a cyclical downturn where we will see a recovery in a year or two – there are some fundamental changes that have occurred.’

Tagged as:  2011 · fell · Housing · Transactions