Homeowners and would-be buyers probably felt the post-pandemic property boom in the UK would go forever.
But it slowed dramatically in the last Quarter of 2022 following the Truss/Kwarteng min-budget and the cost of living crisis.
So as we enter the new world of 2023, what does a more uncertain housing market have in store?
Ian Errington, Head of Residential Property at Blacks Solicitors, shares his predictions of the top trends to expect in 2023 and the key considerations that property developers, mortgage brokers and landlords should be aware of.
Mortgage rates: The much-derided September 2022 Truss/Kwarteng mini-budget sent mortgage lenders rushing to withdraw mortgage products and re-price them significantly higher. This led to predictions of Armageddon in the residential property market. Since October 2022 mortgage rates have started to drop but are not yet back to the levels seen in early September and it’s unlikely that we’ll see such rates again for the foreseeable future. Unless something unexpected pops up, it’s likely that UK mortgage rates will marginally trend down over the course of the year.
Inflation: We’re expecting inflation to slow dramatically into spring 2023, as energy prices drop and base effects come into play. Base effects mean that the rapid increases in inflation that took place in spring and summer 2022, will no longer be taken into account in calculating annual inflation statistics.
Interest rates: The “interest rate shock” has led to a rapid deceleration in activity in the housing market. Base rates have been increased rapidly by most major Central Banks to counter inflation. Andrew Bailey, the Governor of the Bank of England warned a number of weeks ago that markets were pricing in interest rates reaching levels higher than he expected. We therefore may reach a situation in late summer/early autumn 2023 where some Central Banks are U-turning and reducing rates.
Migration: Net migration to the UK is positive once again. This and the limited supply of new homes, combined with lower mortgage rates will help the housing market recover in 2023. The exact timing of this is uncertain, but it is still likely that the first six months of the year will be challenging for residential property sellers.
Buy-to-let: In terms of buy-to-let, the same factors as the above will apply, however rents are also increasing. Up four percent year on year in November 2022, according to the ONS, an increase from 3.8 percent in October. This will act as support for the buy-to-let landlords who may be looking to pick up lower cost houses in 2023 in a depressed market.
For more information on the trends to expect in the Residential Property market in 2023, or for advice on a Residential Property matter, please visit: www.lawblacks.com/personal/residential-property/.