Cornerstone Tax: What was behind the UK housing market’s unexpected March growth?
Cornerstone Tax, the UK’s leading property tax advisers, assesses the question of what was behind the UK housing market’s unexpected March growth, where average house prices rose by nearly £3,000.
Property expert and Group Chairman of Cornerstone Tax, David Hannah, cites falling inflation and supply issues as key factors keeping prices buoyant.
Q1 was a gloomy period for the UK property market, mainly due to lingering effects from the disastrous mini-budget which saw interest rates on mortgages soar, leaving confidence in the UK’s property market at an all-time low. Despite this, it is reported that the average house price has risen by nearly £3,000 this month, as the property market continues to resist predictions that the UK’s economic performance will cause a significant slump during 2023. The average UK home has risen 0.8% in value compared to February and is on the market for an average of £365,357, according to Rightmove. In light of this, housing expert David Hannah, Group Chairman at Cornerstone Tax, gives his opinion on why the UK’s market has experienced growth and will continue to defy predictions made at the beginning of the year.
Despite the record level of inflation, which peaked at 11.1% in October of last year, it has now edged down to 10.1%. Confidence amongst consumers will also have been buoyed by predictions made in the Spring Budget suggesting that inflation will have been slashed to 2.9% by the end of 2023. This would see the return of a significant amount of spending power which would likely further stimulate activity in the housing market. Adding to this, despite the economic pressures seen at the beginning of the year – the UK still has a chronic issue in terms of the undersupply of housing. The National Housing Federation revealed that 340,000 new homes need to be made annually to meet the current demand, however analysis by the Home Builders Federation (HBF) suggests that the government will only manage around 120,000 annually in the coming years.
Another factor helping to keep the UK property market buoyant is its popularity with foreign investors – especially after the value of Sterling plummeted following the mini-budget, making housing significantly cheaper for overseas buyers. Serving as a testament to this, overseas investors now own around £90.7bn of property in England and Wales. Despite analysts’ forecasts for prices within Britain’s housing market to crash as much as 10%, Hannah expects low/mid-single digit growth between 5-8% in 2023 due to a combination of economic recovery and severe supply issues that show no sign of waning.
David Hannah, Group Chairman at Cornerstone Tax, explains:
“Over the whole of 2023, I expect 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, fuelled largely by an undersupply of housing and that will lead to upward pressure on prices.
“New research from the Home Builders Federation (HBF) suggests the supply of new homes will fall below 120,000 annually in the coming years – this is some way short of the government’s 300,000 target.
“I think that with inflation having subsided slightly, and the government predicting it to fall below 3% by the end of the year, this has also had a positive effect on consumer confidence.
“Adding to this, and though they remain high, mortgage rates have also fallen which will have reduced issues of affordability for some prospective homebuyers.
“Due to these factors, I expect that rather than seeing prices fall by the end of the year, I think we will see growth of around 5-8%.”
Kindly shared by Cornerstone Tax
Main article photo courtesy of Pixabay
