Mixed bag for housing in 2023

Unpredictability was certainly a theme for UK housing in 2022, with political turbulence, Bank Rate hikes, and shifting post-pandemic supply and demand patterns all contributing to an uncertain and fast-changing market. As we move into 2023, questions still abound.

House prices to fall

Foremost among these questions is – how far will house prices fall?

Following three pandemic-influenced years of growth, prices are widely expected to go into reverse in 2023. The astronomical year-on-year rises of 16% in July 2022 and 13.6% in August 2022 are highly unlikely to be repeated in the coming years1.

Instead, latest forecasts expect house prices to slide by about 8% next year2. Likewise, estate agent Savills predicts a 10% fall in house prices in 2023 before a return to growth from 2024 onwards.

Sellers are already adjusting their expectations, settling for offers below their asking price. Rightmove anticipates a fall in average asking prices of about 2% in 2023, after a 5.6% increase last year took the average £17,000 higher than in 2021.

Demand is key

The exact extent of the fall in house prices will depend on the various factors that influence supply and demand. In 2022, as demand waned, house prices remained resilient due to limited supply. Supply is not expected to increase much in the coming years, analysts warn.

Demand could receive a boost from the raising of the nil-rate threshold of Stamp Duty in parts of the UK. A similar scheme helped spark the buying spree in 2020 and 2021, though the economic conditions are much changed since then.

Some pandemic factors could still impact on house prices in 2023, including the rise of home working driving demand for more space and a home office. Cost-of-living concerns, meanwhile, could deter buyers. That said, if a modest decline in house prices takes place, with possible regional variations, desire to buy could be accelerated in some places.

A new era

Another key question heading into 2023 is – will average mortgage rates keep rising?

Mortgage rates rose sharply after the ‘mini-budget’ of September 2022. Although they are now significantly higher than at the start of last year, average rates are expected to settle in 2023.

Having reached 3.5% in December 2022, further Bank Rate rises are likely at the start of 2023, though these might slow or stop as the year progresses. The ultra-low interest rates of the past decade seem to be over, with mid-single digits now the norm. For mortgage holders, the new reality of higher rates will obviously have an impact on already-squeezed household finances.

Your future

With economic conditions still challenging for many, we can guide you through the busy market and help you stay focused on your goals in 2023.

Your home may be repossessed if you do not keep up repayments on your mortgage
1Office for National Statistics, 2022
2Halifax, 2022

 

Image by Freepik

3 February, 2023

More news

6 February, 2024

It’s a constant bane for house sellers but it isn’t going away.
Gazundering is when a buyer reduces their offer at a late stage of negotiations to try to pressure the seller into accepting a lower offer. Searches for the term rose by 97% between January and Septem

31 January, 2024

Research* has shown that online searches for the phrase ‘when will mortgage rates drop?’ surged
Hopes that rates have peaked heightened in September. After 14 consecutive meetings where rates were increased, good news came when the Bank of England’s Monetary Policy Committee voted to retain Ba

22 January, 2024

A recent survey* has found that, despite the pressures on the property market, nearly a third of buy
44% of those with hopes to buy are portfolio landlords who already own at least 11 properties. When asked about their motivation, just over a third said they were driven by the fall in UK house prices