As a result of the continued rise in interest rates – which currently stand at 3.5% and are set to continue to rise by 0.5 percentage points – house prices have now fallen for four consecutive months. Figures released from HMRC show that the number of UK house sales fell by 3% month-on-month in December amid signs that rising mortgage rates are impacting transactions, with an estimated 101,290 being sold in the month. This has had a knock-on effect on market analysts’ confidence in the endurance of the UK’s housing market. Despite this, housing expert David Hannah, Group Chairman at Cornerstone Tax, has maintained confidence in the UK housing market being one of the most stable markets in the world. Testament to this, the figures released from HMRC revealed that an estimated 101,920 homes were sold in December 2022, which was 1% higher than in December 2021.

Britain’s political and economic instability in Q4 of 2022, including the recent inflation on interest rates, has consequently caused low levels of confidence across the property market, with some specialists predicting a crash. Figures released from the Office of National Statistics 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 the rise in interest rates, Brits and foreign investors are still demanding property at a time when supply is low. The National Housing Federation revealed that 340,000 new homes need to be built annually to meet the current demand, a factor which Hannah believes will put upward pressure on the market. Serving as testament to the fluidity and strength of the UK housing market, the recent steady purchasing of homes in December 2022 is up 1% compared to December 2021.

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- meaning 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.

“Despite a volatile start to 2023, I expect low to mid to single-digit growth over the UK property market- between 5-8%. Although the recent data from HMRC shows a small decrease of 3% month-on-month in December, I think the market remains in a strong position. The popular narrative has been that there will be a crash of even 10 or 20%, but 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. Despite the tests and tribulations of Q1 of 2023 we are still seeing steady interest and demand.