As we enter into a new year, we also face a new landscape in the property market. The past years have been eventful, with numbers skyrocketing and diving here and there.
A successful investor is adaptable but at the same time, they need to be vigilant of the happenings and shifts in the industry.
No one can accurately predict what the property market in the UK will be in 2023, but we do have data that can serve as a guide to help us prepare and make decisions objectively.
Based on the numbers, here are some of the developments we can expect:
Prices of properties will continue to go down
In recent years, properties in the UK have soared skyward in terms of prices. In the first half of 2022, it accelerated in a flurry peaking at a nationwide average record-high of £294,260 in August.
However, following this surge, the numbers started to subside on a downward trend and have continued to do so for the past four months. It is expected to fall further in 2023.
How much the decrease will be is a variable. There are different projections with some saying it will settle with a drop of 5% while some predict it to be as low as 12%.
Despite this expected recession in price, the resulting numbers are still relatively higher than in the years before the pandemic.
Interest rates will continue to go up
One of the biggest factors affecting the fall in housing prices is the increase in interest rates.
During the onset of the pandemic, the Bank of England announced that it will bring down its bank base rate to 0.1%, the lowest in history. This move was taken in a bid to minimize job losses and bankruptcies due to Covid19. With the economy already recovering, the bank started readjusting rates gradually.
However, the global was then swept by a wave of inflation, pushing up the prices of goods and services. This then forced the banks to reverse their position and raise interest rates. Since December 2021, the rates have increased nine times – from a historic 0.1% to 3.5% as of this month – the highest it has been for the last 14 years.
Until the inflation crisis finally shows improvement, the interest rates are expected to rise further this 2023.
Demand will continue to slow down
Before the bouncing back of interest rates, properties in the UK were being sold in a frenzy. Some houses sit on the market for no longer than two weeks before being bought.
This surge in demand is now starting to cool down. According to several agents and sellers, properties on sale are receiving fewer inquiries since October this year. Prices were also being reduced by an average of 4% in order to meet an agreement with buyers.
More than just the interest rates, the purchasing capacity of people is most likely being limited by inflation. With the cost of living taking a toll on their finances, they are now more reluctant about spending.
Rental rates will rise even more
With buying a house becoming more and more challenging, many people are now choosing to rent a place as a residence. However, many rental owners also decided to sell their properties during the Covid onslaught.
This combination of an increase in demand and a decrease in supply resulted in towering rental prices. According to a recent survey, the average rental price in the UK is £1,174 per calendar month in December 2022. Some expect this to increase further by 10% this year.
If you are looking at opening a Rent-to-Rent property business, 2023 could be a good year to do it.
Rural properties will stay hot in the market
An interesting demographic effect spurred by the pandemic is the movement of people to rural locations. In several regions in Europe, countryside towns and villages were ‘revived’ due to the influx of city dwellers who settled to live in them.
In the UK, this trend is also reflected in the housing data. The market has developed a keen interest in the refreshing space and greenery offered by rural locations, especially after months of being restricted within the concrete walls of their city homes.
Contributing to this is the fact that many businesses have switched to remote work.
Check my previous article, “City or Countryside Property? Choosing Where To Invest”
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