Property transactions hit series low in June

The number of homes changing hands almost halved in June from a year ago, highlighting the difficulties facing estate agents, retailers and government coffers as the housing downturn intensifies.

Revenue and Customs said property transactions numbered a seasonally-adjusted 77,000 last month, the lowest since the current series began in April 2005, after a downwardly revised 91,000 in May.

"This is a double-whammy," said George Buckley, chief UK economist at Deutsche Bank. "Not only will weaker transactions weigh on retail sales but there will be a big hit in terms of lost stamp duty revenues."

Stamp duty raised more than 14 billion pounds in the last fiscal year, according to the latest Budget figures, of which around 70 percent came from property.

House prices have fallen by almost 10 percent from their peak last August as the credit crunch has made it harder and more expensive to get mortgage finance.

The even faster fall in property transactions has raised concern that the housing market downturn could take the economy down with it.

Construction activity is already falling at its sharpest pace since records began more than a decade ago and house-builders such as Persimmon and Bovis Homes have slashed their workforce.

Furniture stores are also feeling the strain. Sofa specialist ScS Upholstery went into administration earlier this month while Land of Leather has been forced into an emergency fundraising.

With the outlook for the property market showing no sign of brightening, the government's revenue forecasts for this year look decidedly optimistic.

In March, the government pencilled in stamp duty revenues of 13.5 billion pounds this financial year, down only slightly from the previous year.

"A 5 billion pound hit to stamp duty revenues this year is not implausible," said Gemma Tetlow of the Institute for Fiscal Studies.

"Lower house prices and falling transactions could have quite a considerable impact."