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Between inflation, Brexit, and the pandemic, housing prices have risen exponentially over the last few years — making it harder than ever for first-time buyers to get their foot on the property ladder. In 2022, property prices in the UK are at an all-time high. According to Rightmove, the average property asking price hit £369,988 in July 2022; up by 9.3% from 2021.
Naturally, this is a cause of anxiety for prospective buyers and current homeowners alike. So what’s coming next for the housing market? Will house prices drop in 2023, or can we expect the housing boom to continue?
Since we last faced a financial crash between 2007-2008, the property market has boomed — and house prices have soared as a result. Stamp duty holiday and low inflation rates have also propelled house prices to new heights, and triggered a ‘race for space’ that saw many families upscale to bigger properties outside of the cities.
Now, faced with rising mortgage rates, construction difficulties, and the government’s Help to Buy scheme coming to an end — buyers simply can’t afford to invest in property to the same degree. The cost of living crisis has plunged thousands of households into financial difficulties, and many buyers are tentative to make big investments until they see what happens with the housing market.
With demand plateauing, economists have forecasted a downturn in the housing market for the first time since 2012. Independent economic research consultancy Capital Economics has warned rising interest rates could trigger house prices to go into reverse, suggesting they’ll drop by around 5% in 2023 and 2024.
While they predict house prices will drop in 2023, they’ve also suggested price growth will remain strong in 2022. Savills has also forecasted a house pricing drop in 2023, but they suggest the prices will drop by a lot less — only 1% — followed by a few years of slow growth. This is due in part to limited amounts of available housing stock.
On the issue of supply and demand, Advias has suggested that the UK is falling short of their housing targets; which is exacerbating matters. According to their blog, the UK’s home target is to build 300,000 new homes annually by the mid-2020s — and they’re currently building circa 200,000 homes a year.
Meanwhile, property website Rightmove has projected house price growth will drop sooner than 2023. According to Rightmove, house price growth will drop from its current level of 9.7% to 5% by the end of 2022. This reflects a slowdown in monthly house price increase; with prices increasing by just 0.4% in June (the smallest monthly rise since January).
Others have suggested house prices could increase in the next few years. in their five-year house price forecast, estate agents Knight Frank have revealed that we can expect house prices to continue to increase in 2023 — but at a much slower rate than the record-breaking numbers at the start of 2022.
We’re also likely to see regional variations on the growth — or downfall — in the housing market. London property prices are growing the slowest, but prices in the capital are still the highest in the UK at around £520,000 – almost double the UK average. Wales is growing faster than any other region or area in the UK, with annual growth currently sitting at more than 15%.
Now that we understand the factors behind a housing market slowdown, are we headed for a housing market crash in 2023? And is 2023 a good year to buy a home?
From what we’ve seen, it’s unlikely we’ll face a housing market crash in 2023. The property market has proved itself to be very resilient, and any discrepancies in supply and demand will eventually level out. However, there’s still a lot of uncertainty around the housing market which might impact your confidence in holding off on buying property until 2023 — especially with rising interest rates.
Ultimately, rising property prices mean homeowners will reap the benefits of a higher profit when they come to sell. With this in mind, the best strategy is still to invest in property if you can afford it. If you’re a first-time buyer looking to make your first property purchase, you may still want to wait for house prices to fall so you can get a mortgage that won’t put you in a tight financial spot.
There’s varying opinions about what we can expect from the housing market in 2023. Some economists predict house prices will fall to zero, and highlight that we’re already seeing a slowdown in some areas in the UK. Others agree, but suggest house prices will skyrocket to new levels before dropping again. Some have suggested a much less dramatic turnout of house prices flatlining, followed by a period of slow growth.
Unfortunately, there’s no way to tell for certain what will happen. What we do know is that houses are currently priced in an unsustainable way — and a dip in the market will have to happen for the number of confident buyers to increase.
If you’re looking to sell your home, and concerned about how much profit you’ll make in the current housing market, we can help. WeBuyAnyHome are cash house buyers who can take the stress and uncertainty out of selling your home. Within just seven days, we’ll provide you with a free, no-obligation offer.
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