The Office of National Statistics has reported that UK house prices experienced their first monthly fall in more than a year, reflecting the effect of rising borrowing costs on the residential property market. House prices dipped 0.3%between October and November 2022, the first decline since October 2021. Despite this, the average new seller asking prices have now risen by 0.9%, reflecting the housing market’s current volatility and making the threat of a crash in the foreseeable future even more unpredictable. David Hannah, Group Chairman of Cornerstone Tax and a housing market specialist with over 40 years of experience, believes that the market will remain buoyant in 2023, experiencing growth of 5-8%, despite predictions from industry figureheads echoing a crash of 2008.
Suggestions that the market will remain buoyant in 2023 stem from the continuing supply and demand issues Britain faces with those needing housing – whether they are looking to buy or rent – outnumbering the availability of stock. Despite house prices falling from annual growth of 4.4%, they maintained growth of 2.8% in the year to December, even as mortgage interest rates began to increase, according to the Nationwide Building Society. The findings from Nationwide prove that despite the mortgage rates rising and the effects of the cost-of-living crisis causing a drop in demand – buyers are still interested in the market making a crash unlikley.
Despite analysts’ forecasts for prices within Britain’s housing market to crash as much as 20%, Hannah expects low/mid-single digit growth between 5-8% in 2023. This growth will be primarily led by foreign demand due to a decline in the price of Sterling as the housing market became 10% cheaper- this means that even if domestic activity continues to fall, the market will remain buoyant. Serving as a testament to this, in 2022, overseas investors now own around £90.7bn of property in England and Wales.
David Hannah, Group Chairman at Cornerstone Tax, discusses:
“We have faced a massive set of instabilities. We’ve had two years of the pandemic, necessary pandemic spending, we’ve had the war in Ukraine, and that has increased inflation which has led to a massive increase in interest rates.
“Despite a volatile start to 2023, I expect low to mid to single-digit growth over the UK property market- between 5-8%. The popular narrative has been that there will be a crash of even 10 or 20%, but I believe the facts suggest otherwise. The chronic issue of supply and demand still exists in the market, meaning that even if the number of buyers falls slightly, there still aren’t enough properties out there for those that are looking.
“Not only that, but after the value of sterling plummeted towards the end last year, the UK market became much more attractive for foreign investors and this is still the case. That means that even if domestic demand wanes, the market will be kept buoyant by interest in the market from abroad. The UK property market has tended to be more stable than any other global market in property.”
