Expert Housing Market Predictions for 2023

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Expert Housing Market Predictions for 2023
LPC & LLM Ume-Kulsoom Anwar
Legally reviewed by: LPC & LLM Ume-Kulsoom Anwar In: Conveyancing

Data shows that house prices have had their biggest jump up since before the pandemic. As a result, homeowners will find the housing market predictions for 2023 to be encouraging and optimistic.

Housing Market Predictions for Property Prices

January 2023 has seen the biggest jump in house prices since before the pandemic. House prices on average have risen by 0.9%.

This increase comes after two months of house prices dropping, resulting in some gloomy predictions for the end of 2022.

Nationwide Bank revealed that house prices fell by 0.9% month-on-month for the first time in October. Furthermore, the consensus was there would be an 8 to 12% drop in average house prices alongside a double-digit decline in sales volumes in 2023. With these figures, it’s easy to see how expert housing market predictions for 2023 seemed bleak for homeowners.

However, data from Rightmove shows that the average asking price has increased by £3,301 to £362,438 from December 2022 to January 2023, giving homeowners something to be optimistic about.

Average house prices have increased up to 20% in some areas of the UK since 2019. Southeast and southwest England have seen the largest increase, according to figures provided by Rightmove in December 2022.

Additionally, buyers can now find deals charging interest rates below 5%, opening the market for more buyers to enter.

A Surge in Requesting Valuations

Data shows that there has been a huge surge in homeowners requesting valuations. However, the number of homes for sale currently remains below historical levels.

Reaching out for a home evaluation is typically the first step a homeowner will take when considering a move. Rightmove has stated that the 5th of January 2023 was the third busiest day on record for valuation requests. Additionally, last week was their busiest day since last August.

Tim Bannister of Rightmove said that the findings “give reasons for some positivity,” with a post-Christmas bounce back underway.

He adds, “The early-bird sellers who are already on the market and have priced correctly are likely to reap the benefits of the bounce in buyer activity, while over-valuing sellers may get caught out as property stock builds over the next few weeks and months, and they experience more competition from other better-priced sellers in their area.”

Despite the surge of property valuation requests, the number of homes for sale is still lower than the norm.

“We expect that the full effect of affordability constraints and last year’s mortgage rate rises will hold back some segments of the market in the first half of the year, but our leading market indicators may start to identify some green shoots of growth that will go on to strengthen in the second half of 2023,” said Mr. Bannister from Rightmove.

Equity-Driven Housing Market

In the run-up to 2007, the banks loosened credit conditions to support buyers. For example, the banks provided more lenient interest rates and less restrictive mortgage conditions. As a result, buyers were able to bid higher for the cost of a property. This caused overvaluation in the housing market which led to house prices falling. Average house prices fell by 12% between 2007 and 2009 as mortgages became harder to obtain.

The good news is that the housing market has learned from its mistake and as a result, the housing market is progressively becoming more equity driven. This means that a deposit on a house takes up a larger proportion of the purchase than it used to, resulting in homeowners having a smaller mortgage proportion. Less than 1 in 20 new mortgages in 2021 involved a deposit below 10%. This figure is far more than in previous years.

Britain’s market downturn will therefore not be as tough to weather as the crises in the early 1990s and the financial crisis because interest rates will not stay as high for longer. Both homeowners and prospective buyers can find comfort in knowing that the banks are better prepared this time around.

The Pandemic’s Effect on the Housing Market

It is important to note that the impact of the pandemic is not yet over. The effect that it has on the housing market is likely to go on for many years into the future. With more people working remotely or hybrid, there is less importance between where someone works and where someone lives. This enables many house buyers to widen their search area when looking to move. As a result, homebuyers can search around for a better value house and sellers can experience a larger pool of prospective buyers. In addition, there has been an increase in retirement, freeing up more houses for the market.

Is Now the Time to Sell Your Property?

Mr. Bannister from RightMove states that the findings “give reason for some positivity” to the start of 2023 for homeowners.

Property Prices at a High

The following data shows the average property price increase per region from 2019 to the present day. Additionally, the data shows the average house price and the average time the house spends on the market.

North East – up 7% (Average house price – £179,673, on the market for 49 days)

North West – up 16% (Average house price – £248,829, on the market for 49 days)

Yorkshire – up 13% (Average house price – £235,340, on the market for 55 days)

East Midlands – up 15% (Average house price – £286,753, on the market for 52 days)

West Midlands – up 16% (Average house price – £281,660, on the market for 48 days)

East Anglia – up 17% (Average house price – £417,192, on the market for 55 days)

London – up 14% (Average house price – £667,587, on the market for 67 days)

South West – up 20% (Average house price – £371,485, on the market for 49 days)

South East – up 18% (Average house price – £473,598 on the market for 54 days)

The above data shows that although expert housing market predictions for 2023, indicate that there may a drop in house prices, (mainly in the South of England,) if you are thinking of selling, now is a good time to do so with property prices at a high and expected to stay there for a while longer.

Mortgage Repayments Cheaper than Rent

As for first-time buyers looking to purchase a home outside of southern England, monthly mortgage repayments will again cost less than rental costs even with mortgage repayment rates at 5%. More accessible mortgage rates mean will allow for more buyers to enter the market, benefiting homeowners also looking to sell.

Impact of Higher Mortgage Rate Overestimated

The impact of a higher mortgage rate has been overestimated. UK house prices could fall by up to 5% but the reductions will largely be in the Southeast of England. Price reductions elsewhere are likely to be smaller and although price reductions may happen, the market is still seeing an increase in every district across the UK. Therefore, if this is something that concerns you and you are thinking of selling, there is still time to do so.

The Cost of Living Predicted to Drive Sales Volumes Higher

The cost-of-living pressures and a greater awareness of how much a home takes to run are expected to become increasingly prevenient in 2023. As a result, these issues are predicted to drive sales volumes higher. With the cost-of-living pressures, there is a new motivation to move more out of necessity than aspiration.

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