What Will 2023 Hold For The UK Property Market?

2022 has been a strange year for the UK property market. At the start of the year, a shortage of supply and high demand led to swiftly-increasing property prices and strong competition for available properties. However, the economy had several big obstacles to contend with this year. The fallout from a global pandemic, the Russia-Ukraine war, and rising inflation have all contributed to a ‘cost of living’ crisis. Now, we’re seeing the year out with mortgage interest rates an average of 4% higher, utility bills almost 100% higher, and many people wondering how they’re going to make ends meet. So, what will 2023 hold for homeowners and the property market as a whole? These are the predictions from some of the country’s leading property experts.

• More homeowners will struggle to afford their mortgage repayments and, as a result, repossessions will rise in 2023
• Mortgage interest rate rises have added hundreds of pounds onto monthly mortgage repayments. This, along with steep rises in utility bills, fuel and grocery bills, has left many households struggling. Repossessions are currently at historically low levels, but experts are expecting to see the number rise in 2023.
• Mortgage interest rates will begin to fall
• Current mortgage interest rates have already factored in a great deal of economic uncertainty, in an attempt to protect lenders. This means that they are unlikely to rise much higher. In fact, now that we have a little more political stability, we can expect rates to fall a little in 2023. We should be clear, however, that they won’t return to the historically low levels we’ve seen over the last few years. Instead, we should expect a new ‘normal’ of 4-5%.
• We’ll see a significant drop in the number of property sales
• The Royal Institution of Chartered Surveyors (RICS) say that inquiries from prospective buyers have fallen for six consecutive months. They predict that this trend will continue and 2023 will see the largest drop in property sales in more than a decade.
• Increased mortgage interest rates and daily living costs have significantly reduced would-be buyers’ mortgage affordability. As a result, Aviva suggests that 1 million first-time buyers have put their plans to purchase a property on hold. A lack of demand at the bottom of the market and extreme caution amongst existing property owners are likely to result in significantly fewer property transactions in 2023.
• Property prices will fall by around 10%
• With buyers’ affordability diminished, and demand subdued, property prices will undoubtedly fall. Experts are predicting we can expect to see at least 10% knocked off property prices.
• Whilst 10% sounds like a lot, it’s worth remembering that property prices grew by an average of 15.5% between July 2021 and July 2022, so a 10% fall would be more of a ‘correction’ of the overheated market we’ve seen since Covid, rather than a market collapse.
• Rising rental prices and greater shortage of rental properties

It’s not just owner-occupiers who are feeling the effects of rising mortgage interest rates, landlords are also feeling the pinch. It is estimated that as many as 30% of those with a buy-to-let mortgage would fail the affordability assessments required to secure a new fixed rate mortgage deal. This would leave thousands of landlords on higher standard variable rate mortgages, and mean they’re forced to charge higher rents to cover their costs. As a result of more challenging market conditions, more landlords will look to sell their rental properties. This will further exacerbate the existing shortage of properties in the private rental sector.

Property expert Danny Luke, from Quick Move Now said: “Unfortunately, it looks like the property market is likely to continue to endure turbulence for some months to come.

“Inflation is predicted to stabilise and then begin to fall again in the first half of 2023. This, along with more predictable interest rates, will help to offer homeowners and would-be buyers a little more certainty and improve confidence. Other external factors will continue to be an issue though. Utility bills are predicted to rise again in April 2023, and although interest rates are predicted to stabilise, they will still be higher than people are used to. This higher household expenditure will continue to cause financial hardship for a significant number of people.

“The property market will, undoubtedly, settle and find a new balance, but it’s likely to be a rocky road for a lot of people along the way.”