Recent reports from property site Zoopla have found that agreed sales in the week of January 22 were down by nearly a quarter year-on-year, as the pandemic property boom grinds to a halt. This was a drop of a fifth compared to the five-year average, although levels were still higher than in the same period in 2019. The average seller must now cut their asking price by between 3pc and 4pc to achieve a sale, resultingin annual house price growth slowing down to 6.5pc, down from 8.3pc at the end of last year. The continued and dramatic drop in house prices reflects the current economic position Brits now find themselves in, as many are looking to save in case of further economic uncertainty. As a result, many buyers would prefer to avoid overspending and therefore have reduced budgets accordingly.

The data also shows that supply is rising with the average estate agent now having 23 properties for sale – up from a low of 14 at the start of 2022. This number is likely to increase as there has been a continued collapse of homebuyer demand since January last year, resulting from the effects of the ongoing cost-of-living crisis, and the unprecedented high inflation levels, meaning that would-be-purchasers are waiting until the market levels out to pre-recession prices. Buyer demand has seen massive reductions as many are now unable to get on the housing market and instead looking to rent to reduce their costs. Despite the lack of domestic demand, property expert David Hannah believes demand from foreign nationals will continue to surge, most likely in attractive, sought-after British cities, such as London, which has already experienced continuous growth in the rental market in 2023.

Despite the fall in domestic demand for property in the UK, Britain’s housing market has become 10% cheaper since the fall in the price of sterling for foreign investors. As a result, Cornerstone Tax experts expect low/mid-single-digit growth of between 5-8% for the entire housing market in 2023 due to the reignited demand in Q4 by foreign investors demanding attractive prime central London hotspots, including Chelsea, Kensington, and Knightsbridge.

David Hannah, Group Chairman at Cornerstone Tax, explains:

“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.”