01 Feb UK house prices fall for a fifth consecutive month – as would-be-buyers turn to a strained rental market
All eyes are currently on the UK’s housing market as house prices fell for the fifth month in a row in the longest string of declines since the global financial crisis more than a decade ago. Property values fell 0.6% in January from December, following a 0.3% drop in December which had resulted in annual price growth now slowing to 1.1% from 2.8%. The costly fall in 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 would-be-buyers would prefer to avoid overspending on property and therefore have reduced budgets accordingly and turned to renting – adding more pressure to an undersupplied rental market. Despite the uncertainty and calls for a dramatic housing market crash from market analysts of 10-20%, housing market expert David Hannah is confident that the market will recover in 2023 due to its historical stability and increased foreign demand by high-net-worth individuals.
The average sale price fell to £258,297 in January, down from £262,068 in December, a fall of 0.6pc, according to Nationwide. The fall now means the average home is worth 3.2pc less than its August peak. It comes as the Bank of England is expected to raise interest rates to 4pc on Thursday, adding further pressure onto mortgage repayments. The rise in interest mortgage rates has had a detrimental effect on the numbers of those now being approved for mortgages which fell to their lowest level in two and a half years in December, and as a result, reduced the domestic demand for housing in the UK.
Banks and building societies authorised 35,612 home loans during the month, the fewest since May 2020, when the housing market was shut due to the coronavirus pandemic, figures from the Bank of England show. As a consequence of this, there has been a considerable surge in demand for rental properties, which has now pushed immense pressures on a market experiencing low stock and record high rent prices – Rightmove is predicting average asking rents will continue to rise by an estimated 5% this year unless there is a significant increase in the number of available homes to let.
Despite the general consensus that the UK’s housing market is heading for a further downward spiral of falling house prices and echoes of the 2008 financial crash, Group Chairman of Cornerstone Tax, David Hannah, maintains a positive outlook on the market, believing that despite the current fall in house prices, the UK property market has tended to be more stable than any other global market in the world. The stability of the UK market has also made it an attractive investment for overseas investors – who Hannah believes will help fuel the UK housing market in 2023.
David Hannah, Group Chairman at Cornerstone Tax, explains:
“In early 2023, we have seen slow demand due to would-be-buyers becoming hesitant to buy until the price of housing and interest rates drop back to a reasonable level. Because of the unaffordable interest rates, we have seen the would-be-buyer apply further pressure to the rental market as they look elsewhere for affordable living. However, over the whole of 2023, I expect to see low to mid to single-digit growth in the UK property market. Despite the negative headlines we have been seeing, there is an underlying pressure on the market, and that will lead to upward pressure on prices.
“In contrast to the lack of affordability currently being experienced by domestic buyers, we have seen the renewed interest that we saw at the end of Q4 by high-net-worth foreign investors fuelling the demand for housing in attractive cities across the UK. This comes in large part due to the fall in the price of Sterling after the mini-budget which made property for foreign investors 10 percent cheaper. I believe this will contribute to the growth of UK’s housing market for the next 12 months. I find it very hard to believe that the UK property market will crash, it has tended to be more stable than any other global market in the world.”
