What does the UK housing market look like for 2023?

We’ve heard the term ‘unprecedented’ a lot in the last three years and that’s because we really have been through some truly incredible global events which have impacted many aspects of life and the way we live it.

‘Unprecedented’ also applies aptly to the absolute rollercoaster of a ride in the property market, with its fall at the start of Covid lockdowns, boom of 2020/21 with Stamp Duty Land Tax (SDLT)concessions, followed by the current inflation spike and the highest Bank of England base rate since the financial crisis of 2008, at 4%. Add to the mix the cost of living crisis, Brexit, the war in Ukraine and a mini Budget with an undesirable impact on economic markets, it’s no wonder that the housing market has been volatile.

So, with all that in mind, what might 2023 have in store for us? Could we see things start to settle down after the boom of 2022?

In this article, we’ll have a look at where we are now and some of the factors that could influence the housing market in 2023.

Why did house prices increase in 2022?

Perhaps somewhat unexpectedly, the pandemic fuelled a boom in the property market as demand outstripped supply, and this continued into 2022.

Figures from Rightmove show asking prices rose 5.6% in Great Britain last year, on top of a 6.3% rise in 2021. The boom has been attributed to a number of factors. In practical terms, the cost of borrowing was historically low at the start of the pandemic – with a base rate of just 0.10% in March 2020 – and this coincided with a number of Government measures designed to mitigate the impact of the pandemic, such as Stamp Duty reductions, which people were quick to take advantage of.

The pandemic and its lockdowns also led to a significant shift in household preferences. Renters wanted to own, homeowners wanted more space with home offices and bigger gardens, and new working from home arrangements gave people greater flexibility over the location. Investors turned to the commercial property market to gain bigger returns in the face of low savings rates.

The result was a huge imbalance in supply and demand which caused bigger than normal house price rises.

Are house prices decreasing in 2023?

Rising inflation, the cost of living crisis and the resulting steep increases in mortgage rates has undeniably impacted house prices, which started to fall at the end of last year, as the balance between supply and demand returned to more typical levels.

According to Nationwide, prices fell for the fifth month in a row in January, pushing the average cost 3.2% below the peak of August 2022. The building society’s House Price Index showed the average price of a home fell to £262,068 in December, down from £272,579 in September.

At the end of last year, Zoopla reported that housing demand had dropped 44% since the mini Budget.

But it’s not all doom and gloom, with some tentative signs of settling now being witnessed as we head further into 2023.

The January House Price Index from Rightmove showed a 0.9% rise in average new seller asking prices – the biggest increase at this time of year since 2020, and perhaps an indication of sellers testing the market. The number of prospective buyers contacting agents is reported to be up 4%  when compared to the same timeframe in 2019, suggesting that buyers are also getting curious.

While prices and enquiries are still down compared to the boom years of 2021 and 22, there is cautious optimism in the air that things may start to stabilise.

Is now a good time to buy a property?

The increase in interest rates, and therefore mortgage rates, has made it more expensive to buy a home. The rising cost of living and energy bills has impacted lenders’ assessment of affordability and therefore the size of mortgage they are willing to approve.

While there’s some evidence that mortgage rates started to come down marginally in January, there was another Bank of England rate rise at the beginning of February, with some uncertainty as to what will happen at the next planned review in March, and the rest of this year.

With all the additional cost and uncertainty about what’s to come, including for those who are coming to the end of fixed-rate deals this year, there’s a general sense that people are waiting to see what happens before making any moves to buy.

But as all these factors continue to impact demand, so house prices continue to fall.. Rightmove predicts a 2% drop for 2023, Nationwide 5% and Halifax 8%, so if you’re waiting for prices to bottom out, it’s difficult to guess when that might happen. It is important to consider the position in local markets. The countrywide position does not necessarily reflect individual areas which have their own micromarkets.

On the plus side for buyers, less demand means more choice when finding the home of your dreams and more power in negotiating a sale price.

Market conditions aside, buying a house generally remains a big financial commitment with an element of risk involved. It’s therefore crucial to carefully consider your own financial position and build in room for additional monthly outgoings, be that mortgage rates, other borrowing, energy bills, fuel, or simply the weekly shop.

Is now a good time to sell a property?

There are some signs that the housing market is starting to pick up again. Fixed rate mortgages have started falling, a trend which continued even after the 10th consecutive rise in base rate to 4% on February 2nd.

You could also be in luck if you’re targeting the first-time buyer market, with figures from Zoopla suggesting half of homes bought with a mortgage in 2022 were snapped up by those taking their first steps onto the property ladder. This figure was the second highest in 14 years.

So while you’re unlikely to have several buyers falling over each other to make you an offer within a week of your house going on the market – as might have been the case six months ago – that doesn’t mean you won’t sell.

Instead, Rightmove predicts a return to more ‘normal’ conditions, with time to sell of around 60 days.

Added to that, even though some people will be reluctant to buy due to squeezed finances and market conditions, there will be those who need to move out of necessity, maybe because they can no longer afford their mortgages, separation and other changes in family circumstances.

Things could pick up further as we head towards spring and summer, which are generally the most popular months to sell. The big unknown remains how much further house prices will fall, which does make it difficult to know whether now is the optimum time to sell.

Ultimately, deciding when to sell is down to individual circumstances, as well as weighing up all the pros and cons and any other relevant factors. If you need to move home soon, for whatever reason, we’ve written a blog which contains handy information for when you need to sell your home fast.

You can always speak to local estate agents or conveyancers like us for an expert opinion and the inside track on what’s happening to the market in your local area, as national average figures do not always apply in every part of the country.

How can Alsters Kelley’s conveyancers help?

The Alsters Kelley conveyancers are here for you. We’ve helped thousands of people buy or sell a home and will be with you every step of the way, from contract drafting right through to completion. It’s our job to make sure the whole process is as smooth, straightforward and transparent as possible – that’s why there are fixed no hidden fees with us.

Whether your are selling or buying you will want the process to proceed as quickly as possible. If you are a seller, we offer a free service to get your home ready for sale on the legal front. This can save 2 – 4 weeks of time in the legal transactions once you have a buyer. For buyers, this also speeds up the purchasing process.

Headed up by Helen Checketts, Solicitor, our approachable, skilled and highly dedicated conveyancing team are accredited members of the Law Society’s conveyancing quality scheme. They are also panel members for most leading mortgage providers.

We offer a free, no obligation, online conveyancing quote, which you can obtain within just a few minutes by filling in the form on our website.

Whether you’re buying or selling, we look forward to helping you through one of life’s biggest milestones.