England, Wales, Scotland & Northern Ireland
Residential Market
Leading Property Market Expert gives year-end round up and lays out what to expect in 2024
From the return of a buyer’s market to the peak in mortgage rates, David Hannah, Group Chairman of Cornerstone Tax, provides an in-depth retrospective on the shifting fundamentals within the property market
This previous year will go down as one of the most unique on record for the property market, claims David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading tax advisory. 2023 has been a year defined by extremes, the fall-out from the Bank of England’s (BoE) fourteen consecutive hikes to the base rate of interest led to mortgage rates peaking in August, with the average rate for a two-year fixed and five-year fixed standing at 6.86% and 6.36%. Whilst house prices reported their fastest fall in fourteen years in October as demand amongst buyers receded.
Within the private rental sector, demand amongst tenants continued its sustained increase amidst a record number of landlords leaving the market citing the sky-high costs associated with their properties. The following supply-and-demand imbalance has since led to a growing number of bidding wars between tenants, as well as an ongoing increase in rents across the country. This has provoked further legislative attention with the introduction of the Renters Reform Bill in May as well as the announced unfreezing of the local housing allowance (LHA) in last month’s Autumn Statement.
Adobe
“It is hard to see what the government can do in 2024 that will affect the structural and affordability issues currently affecting the UK property market."
David Hannah, Group Chairman
According to Hannah, the latter quarter of the year should provoke optimism across the UK’s property market. November saw the Office for National Statistics (ONS) reveal that the rate of inflation had fallen to a two-year low of 4.6% in October, down from 6.3% in September prompting the BoE to continue holding the interest rate at 5.25%. This was followed by the UK’s top mortgage lenders, including Natwest, Nationwide and Barclays, to pursue further cuts to their fixed-rate offerings, with the average cost of a two-year fixed falling below 6% for the first time since June. The housing price index has also witnessed signs of recovery as buyers respond to the sustained fall in mortgage rates, with a second month of growth in November, as reported by the Nationwide Housing Index.
David Hannah, Group Chairman of Cornerstone Tax, discusses what lies in store for the UK property market next year:
“2023 has been a turbulent year in the UK property market, with successive interest rate increases and a generally hawkish approach to the control of inflation by the Bank of England. Emerging trends, such as a 17% decline in transactions in November indicates that the BoE may have overcompensated at the expense of the property market.
“That being said, there has been no crash as some have predicted, but rather, a softening in asking prices and a demonstrable development of a buyer’s market. This can however, be contrasted by some parts of the UK being property hotspots where prices have actually increased.
“November inflation figures and mortgage approvals should indicate an overall cooling off of the UK economy which, if we are to avoid a recession next year, must be acknowledged by the BoE and, in an effort to avoid a sudden crash of inflation, will increase pressure on the MPC to start reducing interest rates sooner rather than later.
“It is hard to see what the government can do in 2024 that will affect the structural and affordability issues currently affecting the UK property market. We have a chronic undersupply of new build homes at a time when we have a net population increase, thereby increasing demand and supporting prices in a weak market. In order to combat the shortfall of housing, the government should remove the impediments that currently exist within the private rental sector – thereby, making homes available for those who wish to rent, have to rent, or simply cannot afford to buy.”
David Hannah. Group Chairman
