The average house price in the UK fell for the fourth month in a row in December, dropping by 1.5% caused by the rising cost of living and elevated interest rates. Halifax revealed that the average house price now stands at £281,272 stating that they expect ‘a reduction in both supply and demand overall, with house prices forecast to fall around 8% over the year.’ According to economic experts surveyed by The Times, the housing market will see its biggest decline since the financial crash in 2009 this year. Two thirds of the economists surveyed predicted that house prices will fall by more than 4%, caused by rising mortgage costs and a likely recession. Adding to this, a new report from Building Societies Association shows that confidence in the housing market is low, with only 14% of respondents thinking that now is a good time to buy a property, compared to 47% who think that it isn’t a good time.
The biggest obstacle in the UK property market seems to be the affordability of mortgage repayments. Mortgage rates have increased due to several rises in interest rates by the Bank of England and now stand at 3.5%. This has caused house prices to grow on an annual basis by 2% compared with December 2021 – the slowest rise since late 2019.
Despite the doom and gloom surrounding the property market, Group Chairman of Cornerstone Tax, David Hannah believes there should be optimism as we start 2023 and forecasts that house prices are set to rise between 5-8% throughout the year. This growth will be led in large part 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.
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. 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, and all of these factors have added to a sense of uncertainty of what’s going to happen in 2023.
“In early 2023 we will see slow demand. Only those people that are forced to sell will see a small 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 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 safe 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 crash and NO 10-20% fall in property prices that we saw in the noughties. The UK property market has tended to be more stable than any other global market in property.”
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