As we look ahead to 2023, many people are wondering what the future holds for the housing market in the UK. While it’s difficult to make precise predictions, there are a few trends and factors that could potentially shape the market in the coming year.
So, what might the housing market in the UK look like in 2023? It is difficult to say with certainty, but there are a few potential scenarios that could play out. The market is influenced by a wide range of factors, including economic conditions, demographic trends, and government policies. Cheltenham Estate & Letting Agents review some of the key factors that may impact the housing market in the UK in 2023.
According to Halifax, the UK real estate market remained strong in the initial half of 2022 until levelling out in the middle of the year and finally declining towards the end of the year. Additionally, it stated that an 8% decline in housing prices is anticipated for 2023, while it did warn that prediction uncertainty is still considerable. By the end of November, the typical house value in the UK was GBP285,579. This is an increase of 4.7% when compared to GBP272,778 of same time last year.
Houses sold to first-time homebuyers experienced lower annual house price growth, at 3.6%, compared to houses sold to existing owners, that saw prices jump by 5.3% compared to those in the previous year. New buyers are being priced out of the market by rising mortgage rates, while homeowners wishing to remortgage face devastating payment hikes. With predictions of a minimum 10% price drop the next year due to rising interest rates, the pace of property value growth is swiftly slowing.
On October 12, the Bank of England’s financial policy committee warned that if mortgage rates and living expenses keep rising, the percentage of homeowners having difficulty making their mortgage payments might reach a peak not seen since the 2008 economic crisis. For some households, it will be difficult to manage the anticipated increase in the price of essentials while also paying higher loan rates.
A slowdown was practically unavoidable with such quick house price growth and the escalating economic headwinds. This was seen in the flattening of house prices in summer, prior to the 2.3% drop recorded in November.
However, policymakers predicted that this would not lead to a banking crisis because borrowers were in a “better position” than before the financial crisis. According to the Bank, this was partially caused by limits on how much a person may borrow for a mortgage in relation to their income.
Buyers and sellers are becoming increasingly cautious. As growing living costs harm household budget and rising interest rates raise monthly mortgage payments, housing demand has slowed.
Expect an 8% decline in UK home prices the following year. To put this in context, such a drop would return the average house price to its April 2021 level, restoring only portion of the gains achieved during the pandemic.
Mortgage defaults and possessions are currently at record lows, but as strain on homeowners increases over the coming year, they will undoubtedly start to rise. It is difficult to imagine that the housing industry won’t face additional pressure as the domestic economy adjusts to rising mortgage rates and the rigid labour market starts to loosen.
Given the dismal housing statistics, investors will likewise reassess their perception of the real estate market. Buy-to-let has been a tremendously rewarding investment over the last 15 years thanks to growing prices and affordable mortgage rates. This has raised inflation rates over their long-term average, but as the market turns, investors may seize the chance to sell or at the very least cease new purchases, which would result in a speculative collapse.
Some real estate specialists refer to the UK’s (and the world’s) housing market’s long-term tendency to defy ominous forecasts and show that prices are rising despite repeated predictions that they will decrease. Political obstacles to developing the additional homes required to accommodate an increasing number of households suggest that house prices will likely continue to rise over the very long term.
In conclusion, there are many factors that could potentially impact the housing market in the UK in 2023. It’s important to keep an eye on economic conditions, lending standards, government policies, and global trends, as these could all potentially shape the market in the coming year. As always, it’s a good idea to carefully consider your own financial situation and do your own research before making any decisions about buying or selling a home.
