The property market is always changing, with several factors at play affecting both buyers and sellers. 2022 was a year of economic turbulence that made it difficult to predict the long-term direction of the property market and heading into 2023 there is some uncertainty about what is to come. To give you a better idea of what may happen over the next 12 months, we explain what to expect in the property market for 2023.
What is happening in the property market now?
There is a lot of talk about a ‘cooling’ of prices in 2023, although house prices have remained largely stable despite the economic ups and downs.
Looking back a little further, 2021 saw a huge rise in sales due to the Government’s Stamp Duty Holiday, although this returned to more normal levels in 2022. And while there was a lot of economic uncertainty over the past year, there were no huge fluctuations in house prices. However, they did begin to fall for four months in a row from September, with the average price dropping 0.1% month on month to £262,068. Whether this is a trend that will continue in 2023 and beyond remains to be seen.
Will property prices crash in 2023?
Due to the financial turbulence seen over the past year there has been a lot of talk about a ‘crash’ which has understandably created uncertainty for homeowners looking to sell. However, given the number of factors that influence the market it is difficult to say for sure whether there will be a price crash that causes prices to plummet. And when you consider that there wasn’t a crash because of Brexit or the pandemic it demonstrates just how resilient the housing market can be.
With rising mortgage costs and the ongoing cost of living crisis just two examples of the many difficult factors facing homeowners in 2023, it is sensible to assume that house prices will likely continue to lower over the coming months. But this can be seen as more of a ‘correction’ than a crash given the number of years of house price inflation seen in recent times.
Will buyers expect a cheaper price?
With the market going through an adjustment, there will be expectation on the part of buyers that prices will be lower, so you may be asked to negotiate.
OF course, you do not want to sell your property too cheaply, although you should be realistic about what your home is worth in the current market. If you are selling to some who has yet to fully secure a mortgage your property will undergo a valuation from the lender, which could see them ‘down value’ your property which can slow things down.
This is why it is important to work with the right estate agent to see your home. Working with a local, reputable company with an established track record can help you sell faster and avoid incurring unnecessary fees. They will also be able to give you a realistic valuation of your property based on current market conditions, so you extract as much value as possible without going through a slow and protracted process.
Will mortgage rates decrease in 2023?
Of huge importance to homeowners in 2023 will be mortgage rates that have been heavily impacted by a rise in interest rates. The Bank of England (BoE) increased the interest rate from 0.1% to 3.5% and mortgage rates increased further due to the shock of the Mini Budget of September 2022.
Some experts predicted interest rates could go as high as 6% in 2023, although rates slowly began to drop towards the end of the year, so 4.5% is now the expected peak.
However, it is difficult to predict with any real accuracy just how high or low mortgage rates will be in 2023. For example, if the BoE raises the base interest rate it doesn’t necessarily mean that lenders will add the same amount to their mortgage rates as there are lots of factors involved.
Homeowners on a tracker mortgage will certainly see an increase if the base rate rises again. Those on a standard variable rate may or may not experience a rise as this is decided by the individual lender, so they may pass on all, some, or none of it – they are also able to increase the rate by more, if they wished.
After taking this into consideration, it is important to ensure that you are currently on the right mortgage. Look at your options and speak with an independent financial expert, if possible, to see if you need to make a change.
What are the housing experts advising about the property market?
There is still some uncertainty about the direction of the property market over the next 12 months, due to the unexpected twists and turns experienced in 2022.
So, it is likely that house prices will continue to lower in 2023, but the key question is, by how much? After the September Mini Budget in 2022, house prices were forecast to drop by a huge 20%. However, the financial markets have steadily stabilised since then, which means housing market predictions are not as erratic.
For example, both Lloyds Bank and Halifax predict that house prices will fall a further 8% in 2023, a forecast that is also matched by Halifax. Lloyds have also set aside £668m to cover debt that arises from borrowers who experience difficulties in maintaining their repayment requirements due to the higher mortgage costs.
Most experts expect there to be a lower number of transactions in 2023, with perhaps 750,000 homes being sold in comparison to the 1.2m seen sold in the previous year. This will likely be because buyers are waiting for a price crash that won’t arrive and sellers are less incentivised to move.
Experts generally agree that you may benefit from completing on a new home that has a higher price rather than waiting for a lower price that comes with a higher mortgage rate.