As we entered 2023, uncertainty surrounded predictions as to the shape of the property market for the New Year. The spike in the cost of mortgage borrowing has led people to believe that the property market is likely to crash in 2023.
It’s hard to believe any different when the UK media is intent on promoting this message. But is it really the case?
How did COVID-19 affect the property market?
During COVID-19, the country saw an unexpected rise in the value of property. House prices saw annual growth of over 10% each year during the pandemic years.
Growth in the UK reached its highest rate in over a decade. There are various theories as to why this happened. Firstly, the housing market was assisted by a temporary reduction in Stamp Duty. The ‘Stamp Duty Holiday’ essentially made houses a little cheaper for the majority of buyers. In addition, as the Stamp Duty Holiday was time limited, many rushed to make use of this benefit before it ended in September 2021.
Secondly, in many cases households’ preferences changed during the pandemic. Due to remote working, many London residents decided to up sticks and move out of London, no longer with the requirement to commute to the office. This situation was replicated throughout the country as commuters prepared for a longer journey once or twice a week as opposed to a more accessible location to the work place for a daily trip. Others sought out different locations and lifestyles, with greater needs for gardens or home offices. Rightmove statistics illustrate clearly how sharply the search demand for properties with these amenities increased.
What is happening to house prices now?
Property prices fell slightly towards the end of 2022. This is largely because the demand to move decreased due to the current cost of living crisis. In addition to this, the ever-controversial September mini-budget saw many mortgage providers withdraw deals and hike up borrowing rates. Increasing the cost of borrowing across the board.
The Bank of England has raised the base interest rate, meaning that high borrowing costs could be here to stay, certainly for the medium term. As we have explored in a previous blog talking with Andy Henry, a mortgage advisor recommended by us, mortgage rates are expected to settle as we commence 2023.
Despite this, asking prices are still defying expectations into 2023. They have risen by 0.9% this month verses December 2022 according to Rightmove.
Are there changes to the rental market?
Rent prices have increased to record levels due to a shortage of properties on the rental market and a growing demand, as an influx of would-be first-time buyers look to rent for a prolonged period as they wait for mortgage rates to fall. Where investors have a mortgage on their rental property, an increase in the monthly repayment figure has given little option to the landlord than to increase rent. Taking London out of the equation, the average rent in the UK is now £977, up by 9.4% from December 2021, according to the latest figures from the Homelet rental index.
Property experts predict that the cost of renting to climb by a further 10% in 2023.
It is also predicted that agents and landlords will see an increase in demand of renters looking for suburban or rural properties. As many employers engage with a new remote or hybrid working model, there is less need to reside close to the workplace. This also highlights a need for landlords to consider the amenities within their investment property, as tenants will require better technologies within the home to accommodate their work space.
Why you shouldn’t delay moving – the good news!
There is no secret that 2023 expects to see a much cooler property market, however, there are still significant volumes of motivated buyers ready to move this year. Those who had their property ready on the market ahead of the New Year, have found themselves in an incredibly strong position as buyers flocked to Rightmove to begin their search before the 31st December.
Rightmove reported that during the week commencing on Boxing Day, there was a 20% increase in searches of homes for sale on their site compared to the previous week. This is, of course, a positive sign that buyers are actively kickstarting their New Year with an interest in new properties coming to the market, and that consumer confidence has not disappeared.
With the choice of available properties on the market narrowing towards the end of 2022, it could be a great opportunity to achieve more focus on your home. Which is why it’s more important than ever to make sure your property is market ready with the help of a competent agent.
It is also important to choose an agent who has recently sold properties just like yours, this way there is an increased chance of them having applicants on their register who are looking for a similar property, avoiding long spells on the open market. Similarly, if you are a first-time buyer who is hesitant to ‘press go’ this year, the predicted sharp increases in rents in 2023 could be the required encouragement to seek out your first investment, in order to pay your mortgage, and not your landlord’s. In addition, with funders changing their rules on eligibility, taking into account rental payments when assessing financial stability, a discussion with a qualified financial advisor is highly recommended.
What are mortgage rates doing?
There’s been more stability in the financial markets in the past couple of months than was initially predicted. Despite media scaremongering post mini-budget, there has been an increase in the number of mortgage deals available recently.
In a previous blog at the end of 2022, we spoke to Andy Henry from Kennedy Mortgage Practice about current mortgage rates.
Discussing first-time buyers entering the property market, Andy said ‘Everyone will be in a different financial position and will need to carefully consider and plan for the long term. If you find the property of your dreams, and have a good stable income and deposit, then go for it. If you know you can afford the mortgage on today’s rates, then definitely make the investment!’
Contacting a trustworthy and tested mortgage broker in 2023 is going to be vital, as the cost-of-living crisis continues, the importance of sensible financial decisions is at the forefront of minds. A skilled mortgage broker with a wide knowledge of all the offers available from a variety of lenders should be able to secure the best deal for you. Post the mini-budget, mortgage rates have thankfully steadied and mortgage brokers will be keen to attract your business.
The House Price Index – An early insight
Taken from the Rightmove’s January insights, Tim BannisterRightmove’s Director of Property Science says:
‘After two months of falls, the average price of property coming to the market for sale rises again by 0.9% this month (+£3,301) to £362,438. Whilst a rise in asking prices is expected in January, this is the highest at this time of year since January 2020. After the market’s uncertain final few months of 2022, this familiar seasonality is a tentative sign of stability, with new sellers feeling confident to test the market, albeit at average asking prices that are 2% below October 2022’s record. It’s still early days, but this is a more encouraging start to the year than many anticipated.’
As a result of the above, buyers are feeling more confident to enter back into the market and our agents have seen sales enquiries rise.
Choosing to sell your home is one of the biggest decisions to face, especially in an uncertain market. With our mix of local knowledge, experienced agents, valuation experts, photographers, marketers, and negotiators, you have our word that we will work hard to get the best possible outcome for you.
In order to help your property stand out from the crowd, we tailor our property marketing package to get the very best results for your sale. Through our network of local offices across the Midlands, our London office, online and via our extensive database of motivated buyers and our focused digital and social media campaigns, we can get your property seen by the right audience and very quickly!
Felicity joined the marketing team for Howkins & Harrison to drive forward the social media and digital presence of the business following roles within both residential sales & lettings. Felicity joined Howkins & Harrison in the Rugby Letting department in January 2017 as Property Manager for the managed portfolio. Felicity is passionate about sharing the services of the H&H team and providing support to clients in the marketing of the land & property.
