Property market prediction

Predictions for the 2023 property market: What’s in store?

The UK property market continues to be viewed as one of the most stable investment options available to beat inflation, but what opportunities lie in the year ahead?

Overall, predictions for the UK property market in 2023 have drastically stabilised compared with when the country was at the height of political and economic turmoil in autumn 2022, as we swiftly changed prime ministers and leading government figures. 

Rising inflation and interest rates certainly perked up the ears of anyone with an interest in the property market, from homeowners to investors, and the climbing cost of living continues to present many challenges. 

But from mortgage rates to house prices and sales volumes, many forecasters for the year ahead believe that the UK property market overall is set to stabilise. 

Mortgage rates

Despite rising to 14-year highs in October 2022, mortgage rates in the UK property market levelled off by the end of December.

The average two-year fixed rate product rate hit 6.65% at its highest point in October, according to data from Moneyfacts. However, this fell to around 5.8% for the latter weeks of December, remaining at a stable level. 

While the outlook is that mortgage rates will remain higher than we have been used to over the next few years, according to the Office for Budget Responsibility, they are not at a high level historically. It may mean property owners will need to adjust their budgets, though, when remortgaging or buying new properties. 

According to Guy Burnett, executive director of development at SO Resi, smaller properties and flats may become more sought after.

“As the mortgage sector settles, we’ll expect to see the wider market start to come back to life in summer 2023, though I am confident that rates will not reach the historic lows that we have seen in recent years,” he says.

“With the race for space well and truly over, the apartment market is not expected to take the same hit, as buyers look for smaller homes that are well connected, more affordable, and cheaper to run.

“Against all odds, I believe that 2023 will be the year of the first time buyer, and shared ownership will continue to hold a major stake in making this possible.”

Rental market

One major trend that has been booming in recent years is the popularity of the build-to-rent sector. This has affected the rental market as a whole, as renters – particularly professional or more affluent ones – now expect more from their properties, and can be willing to pay more as a result.

Proptech and technologies aimed at the rental homes in the UK property market are therefore expected to feature more prominently, which is a shift that growing numbers of landlords are keeping abreast of. 

Jeremy Heath-Smith, CEO of Spike Global, says: “The big question for developers and BTR operators in 2023 is how to continue to remain attractive to customers within an increasingly competitive market. The ability to offer residents extra benefits goes a long way.”

He adds: “Renters are no longer prepared to accept a leaky flat with a landlord who ignores your emails. Instead, renters are rightfully demanding better service, with many opting to enjoy a carefree, mortgage-free life for longer. 

“Residents’ technologies therefore play a significant part of enhancing the tenant experience – who wouldn’t want the hotel experience, with staff, parcels and amenities all at the touch of a button?”

Property market: prices and volumes

Predictions for house prices in the UK property market over the course of 2023 range from a 20% fall to a 1% fall. Meanwhile, the forecast for certain pockets of the UK and property types is that there will be no decline at all.

The most popular consensus, though, is that sales volumes will take more of a hit than house prices. This is due to the fact that many believe that overall supply numbers will remain low in relation to demand, supporting prices.

Simon Cox, founder and managing director of Walter Cooper, says: “I expect 2023 will see the return of a more balanced market as housing stock and sales numbers decrease back to pre-pandemic levels.   

“However, while overall supply numbers are set to decrease, I expect the demand for new-build homes is likely to continue. Larger housebuilders in particular find themselves in a more stable financial position than the previous recession, as a result of the booming market over the last few years. 

“Given this, I expect to see a continued demand in the land market from those companies looking to take advantage of the falling price of land.

“This is likely to have an impact on the wider industry, as SME housebuilders, who will be more affected by rising material costs, struggle to keep up with the competition allowing the top PLCs to take monopoly of the new build market.”

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