Property market predictions for 2023

With signs that the UK’s property market is cooling, experts from across the property sector have shared their thoughts on what’s to come in 2023 – including rents rising by a further 10% as a lack of supply begins to bite.

Looking back, 2022 was a rollercoaster year for the property market, following 2021 when the pandemic property market boom, fuelled by the stamp duty holiday, sent buyers into overdrive and pushed house prices to record highs.

Despite the first increase to interest rates coming in December 2021, the market continued to see a robust and consistent level of activity throughout much of 2022, with the latest sold price data from the Land Registry showing that house prices currently remain 9.5% higher than they were last year.

House prices fell between November and December

However, with a string of interest rate increases driving up the cost of borrowing, the latest house price index from Halifax has revealed that house prices fell by -2.3% between November and December, the first signs that the market is starting to cool.

The latest data on buyer demand shows that the level of homes listed for sale that have been snapped up by buyers is also currently sitting -1% below this time last year, with the total number of properties sold in 2022 estimated to drop by 32% when compared to 2021.

At the same time, a continued reliance on the rental sector to put a roof over the heads of many has seen the average cost of renting across the UK increase by 11.1% in the last year, now averaging £1,175 per month.

Residential sales and lettings predictions

James Forrester, the managing director of Birmingham estate and lettings agent, Barrows and Forrester, said: “While the focus is often on house prices, it’s the transactions these prices are agreed on that fuel the furnace of the property market.

“In 2021, we saw huge peaks of up to 165,000 homes sold per month and while this has subsided in 2022, we’ve seen a far more settled, consistent level of homes sold on a monthly basis – between 60,000 to 75,000 per month.”

He adds: “We also expect rental values to remain robust, climbing by between 5 to 8%.

“2022 brought further proof that the government remains intent on attacking the nation’s landlords, with changes to capital gains tax thresholds.

“I expect that the one time they show any sort of backbone when it comes to delivering on housing policy, it will be with regard to Section 21 notices, further reducing the power of landlords when it comes to safeguarding their own investments.

“As a result, we expect many more will reconsider their future in the sector, further reducing supply to the detriment of the nation’s tenants.”

Continued cooling in current property values

Marc von Grundherr, the director of London lettings and estate agent, Benham and Reeves, said: “A further increase to interest rates will certainly spur a continued cooling in current property values but it’s extremely unlikely we will see the deep freeze that many may lead us to believe.

“At most, we can expect a 5% drop during the first six months of the year, at which point stability will return and house prices will start to level out.”

He adds: “As for the rental market, we’ve seen values climb consistently higher over the last year and with a shortage of stock continuing to be a burning issue, we can expect the cost of renting to climb by a further 10% in 2023.”

‘We can confidently expect property values to decline’

The managing director of the House Buyer Bureau, Chris Hodgkinson, said: “While there’s no need to buckle up for a house price crash, we can confidently expect property values to decline quite significantly over the coming year, with a double digit decline unlikely, but certainly not out of the question.

“We’ve already started to see a weakening of the market due to the combined pressures of high inflation, lower wage growth, and rising interest rates putting massive pressure on household budgets.”

Mortgages and finance predictions

Jonathan Samuels, the CEO of property lender Octane Capital, said: “We’re unlikely to see a general election in 2023 and this should bring continued political and economic stability to the UK property market.

“The one negative for 2023 is the potential for property prices to fall due to the raised interest rate environment that started mid-late 2022.

“That said this is likely to be spread unevenly through the country.”

He says that in areas where yields are higher, typically in northern areas of the nation, and property types with higher yields, such as HMOs and ex-local authority homes, will be best placed to meet ICR tests and resist downward pricing pressure.

However, in areas that have wealthy cash buyers or low loan to value borrowers will also be better insulated from the impact of higher borrowing costs.

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