What Will Happen to the Property Market in 2023?

Property Market Update 2023

With the current financial turbulence, we look at how the year started, how it’s going and what may be in store for the property market over the remainder of the year.

How the year started

After a quiet end to 2022, we started the year off with relatively stable house prices. Buyer levels began to pick up in the New Year, and higher demand brought numerous sales and offers.

As the year has continued, the cost of living crisis has persisted, prices across most industries have risen with inflation climbing at a rapid rate. The Bank of England have raised the base rate several times throughout 2023, in a bid to try and control Britain’s inflation problem. This, in turn, has resulted in higher interest rate mortgages, which has had a knock-on effect to the housing market.

How it’s going

As we settle into the second half of the year, things could be starting to look a little brighter for the future.  Although the Bank of England’s base rate continues to climb, the annual inflation rate slowed to 7.3% in June, down from 7.9% in May, according to the Office for National Statistics. The Bank of England has also stated, ‘we expect inflation to fall to around 5% by the end of 2023. Then we expect it to keep on falling and reach our 2% target by early 2025.’.

In addition, several big lenders have recently slashed the cost of their loans by up to 0.71 percentage points. With major lenders taking this action just over the last week or two (August 2023), it’s believed other lenders will follow suit, which could start a price war. This re-pricing will be beneficial to first-time buyers who may be struggling to afford to get on the property ladder, plus thousands of households looking to renegotiate their mortgage or move home between now and the end of 2023.

If your current fixed-rate mortgage will be coming to an end within the next six months, you should explore your options as soon as possible. We have in-house mortgage advisors within all our offices, with access to the whole of the mortgage market. If you’re worried about what your mortgage payments could escalate to once your fixed-rate ends, they can discuss a range of products and options with you that could be more affordable.

What will happen to property prices?

As a result of interest rates increasing throughout 2022 and 2023, we have started to see a knock-on effect on house prices. According to Nationwide’s House Price Index, the average UK house price came down 0.2% from June 2023 to July 2023, and down 3.8% when compared to July 2022. However, this figure is still much lower than earlier predictions of price falls of up to 10% throughout the course of the year. And, although it looks likely that house prices will slowly continue to drop, this prediction has now changed, with forecasters now estimating prices to fall by around 5% by the end of 2023.

House prices within our areas have continued to remain fairly stable in comparison to other areas of the UK. Although we’ve noticed buyers approach their offers with an air of caution, rather than the crazy over-bidding we saw in the early half of last year, we are averaging 98-100% of asking price now, compared to 100-108% in early 2022.

What’s happening with house sales?

Sales are taking a little longer, but the majority are still completing, with urgency tending to focus more around mortgage offer expiry dates. We have not seen many forced sales or repossessions, which was the general fear of higher interest rates. Most homeowners tend to concentrate on the difference between their sale price and purchase price rather than headline figures, with approximately 80% of our sellers making onward purchases.

Supply and demand levels have shifted, our stock levels remain sound and the number of buyers in the market have reduced in comparison to 2022. Consequently, buyers now have more choice and the market is shifting in favour of the buyer.

Interest rate changes have also affected the rental market. With landlords facing higher monthly mortgage repayments, this has hit renters in some places by a 10% or more increase. In turn, we’ve seen a number of investors deciding to sell their buy-to-lets, and in a monthly payment comparison, buying property has become a cheaper option than renting!

What should I expect if I’m looking to sell my property in 2023?

The market is currently having to adjust to changes, so if you’re looking to sell you should approach it realistically. No one wants to sell their home too cheaply, but you also need to be sensible about what your property is worth. Buyers will be looking to negotiate, especially if their house purchase requires a mortgage. An incorrect marketing price could raise unwanted questions from purchasers and can also contribute towards eventually selling for a lower price.  Don’t forget, all lenders will carry out a mortgage valuation survey – and if the property is ‘downvalued’ at a later stage, this will slow your sale down.

In the current market it’s more important than ever to choose the right estate agent to sell your property. Don’t be fooled by agents who overinflate your market price and promise low fees, while tying you into a long contract. Instead, find an estate agent who is transparent, honest and successfully selling properties in your area similar to yours. The best estate agent will be prepared to work for you, getting you the best price for your property within a difficult market. They will have a comprehensive list of buyers on their database, take care to market your property in its best light and confidently offer shorter or no tie-in periods.

For a Free Valuation, contact your local Arden branch. We have offices in Barnt Green, Bromsgrove, Lydney, Redditch, Rubery, Solihull and Worcester, and our friendly team of experts are here to advise and help you every step of the way.