As the housing market entered Q1 of 2023, confidence in the market was near inexistent. Carried over from Q4 of 2022 was the rise of inflation, high interest rates coupled with the effects of the infamous mini budget which put many buyers’ plans on hold. Despite the mini budget creating uncertainty – including the price of sterling falling 10 per cent in price – it inadvertently made the UK a cheap haven for foreign investors. Unlike what we have seen in the reduced market activity from domestic buyers there has been a noticeable rise in foreign demand of high-net-worth individuals in the UK, despite a new register coming into effect for overseas investors. Housing expert, David Hannah, Group Chairman at Cornerstone Tax, discusses that despite the recent wobble of uncertainty in the UK market, foreign investment in 2023 will keep Britain’s housing market buoyant.
The register of overseas entities maintained by Companies House which came into force in August 2022 means that foreign buyers are now forced to reveal their identities to allow them to buy and sell land or property in the UK. It has been described by experts as being ‘riddled with flaws and loopholes’, though the government has stated the register intends to ‘flush out corrupt elites laundering money through UK property’. It was predicted that it would make foreign investment in Britain an unattractive proposition, however with the recent fall in sterling, reports show that more than 50 London neighbourhoods saw activity in the over £5 million price range in 2022, with the reach of this price tag likely grow even further in 2023.
In keeping with the prediction that price tags of London homes will reach these lofty heights this year, Cornerstone Tax experts expect low/mid-single-digit growth of between 5-8% in the entire housing market in 2023. The housing market will especially see the continued demand we saw in 2022 from foreign investors for attractive prime central London hotspots, including Chelsea, Kensington, and Knightsbridge.
David Hannah, Group Chairman at Cornerstone Tax, explains:
“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. Recent government policy in the UK has led to a devaluation in sterling and at least one, if not two, regime changes in the conservative party. All of these factors have added to a sense of uncertainty about what will happen in 2023.
“In early 2023, we will see slow demand. Only those people forced to sell will see a slight fall in prices; however, over the whole of 2023, I expect to see low to mid to single-digit growth over the UK property market- between 5-8%. Despite the negative headlines that we have been seeing, there is an underlying pressure on the market, and that is leading to upward pressure on prices.
“We now have a growing number of people that want to move to the UK. The first is the overseas investor who regards UK property as a haven for their money because the country they principally live in is not economically or politically safe. The second are those who want to become second homeowners. The third and final group is those who want to leave their country of birth and are in need of a home. All of these factors over the course of the next 12 months, I believe, are what will support the UK market and leave it with a modest and steady rate of growth.
“There will be NO continuous retreat of foreign investment out of London and the rest of the UK. With sterling remaining relatively cheap, properties in London and other major UK cities will still be seen as sought-after investments. The UK property market has tended to be more stable than any other global market in property.”
