Experts’ key property predictions for 2023

The final quarter of 2022 saw the housing and mortgage market plunged into chaos by the Kwasi Kwarteng mini budget. Despite moves to stabilise the economy by the incoming Government led by Rishi Sunak, prices began to fall.

And the Halifax House Price Index revealed in early January that prices fell month on month by 1.5% to end of December 2022. That means a typical UK property now costs £281,272 compared to £285,425 the previous month.

Although house prices rose by 2% throughout the whole of 2022, the price trend was very much on the downside.

But what does 2023 have in store for buyers and sellers? Will there be a crash as some have predicted, or will the situation stabilise and begin to improve?

The Government’s official forecasting experts, the Office of Budget Responsibility predicts that house prices will continue to slide as we go deeper into this year and will continue to do so until the Autumn of 2024 by which time they predict a 9% drop.

Property portal Rightmove has indicated that it believes 2023 will see a 2% drop overall in 2023 while estate agents Knight Frank are forecasting a 5% fall.

Cost-of-living crisis

According to thisismoney.co.uk, this downward trajectory in house prices is being put down to higher mortgage rates with the average 2-year fixed rate at 5.8% compared to 2.34% last year. And, they point out that over the past 25 years, the gap between house price rises and wage increases has become much wider.

According to statistics from the Office for National Statistics, house price affordability has worsened in England and Wales from 3.5 times the average salary to 9.1 times.

All of this, of course is worsened by the cost-of-living crisis with latest inflation figures for the UK currently running at 9.3% according to the ONS.

But all is not entirely doom and gloom. According to consumer magazine Which? The drop in house prices could be a boon for First Time Buyers looking to get on to the property ladder – although the cost-of-living crisis will undoubtedly deter some from making a purchase.

Mortgage rates are gradually beginning to fall again with some of the cheapest deals edging below 5%. But even the most optimistic commentators are not suggesting that rates will return to the low levels of even a year ago.

And higher mortgage rates combined with the general economic situation is likely to result in borrowers turning to lenders for additional support through term extensions or pauses and/or reductions in repayments.

Positive signs

Demand for more energy efficient homes is likely to increase during 2023 with new-builds likely to be the most popular. In fact, some mortgage lenders are offering cheaper deals on energy efficient homes and some homeowners who may have been considering a move are predicted to stay put and invest their money in renovation instead.

And when looking at forecasts for 2023 and beyond there are positive signs to be found. Mortgage rates have stabilised and there are currently some best buy rates at 4.5% for those with a deposit of between 25% and 40%.

There is a strong possibility that rates may fall a little further this year.

Homeowners Alliance CEO Paula Higgins stated: “It’s understandable that people get nervous when they hear of predictions of a house price crash being bandied about. It’s too hard to predict whether there will be a crash where prices plummet; we must remember that it didn’t happen with Brexit, it didn’t happen with the pandemic and we still have a fundamental shortage of housing.

“Considering the difficult factors homeowners face, from increased mortgage costs and the cost of living crisis, it seems sensible to assume house prices will drop further next year. But after so many years of house price inflation, we feel it’s safe to assume this will be more of a correction than a crash.”