What To Expect from the Property Market in 2023

Over the later part of 2022, we have experienced unprecedented economic and political turmoil, which will remain as we head into 2023. And with that, it is now inevitable that the UK housing market will continue to be affected by this uncertainty, coupled with a cost-of-living crisis and looming recession. 

Here, I aim to cut through the noise to give his predictions for the property market in 2023:

More interest rate rises to come

It’s clear that the 12 year + housing market boom is nearing an end as the uncharacteristically low interest rates that the UK has experienced over the last two decades come to an end. Since 2019, they haven’t gone above 1%. However, the second half of 2022 has seen the rate rise due to the energy and cost of living crisis. While we don’t expect the base rate to jump again in 2022, we do think they could be as high as 3.5% within Q1 2023 and even higher still by the end of next year.

Lending criteria to tighten

The knock-on effect of this is that banks are tightening their lending criteria and making it more difficult for anyone to get a mortgage. The reality is that many property owners have only ever experienced sub 3% mortgage rates – but these rates have been uncharacteristically low since 2008. Those who owned property before then will remember rates sitting closer to 5% and even reaching 15% in the 90’s, so the higher rates are slightly easier for those individuals to digest.

Nethertheless, couple this with stamp duty increases, rising inflation and a cost-of-living crisis, the increased rates are a hard pill to swallow and for many it means what they could afford at the beginning of 2022, is no longer within financial reach.

Less stock and less demand

With interest rates for new products much higher than they have been in recent years, it’s become much more difficult and expensive to get a mortgage. This makes people less likely to want to move and creates a shortage of houses on the market. Ordinarily, a shortage would cause prices to go up, but due to the current economic climate, this isn’t likely to be the case. 

Property investment could lose appeal

As interest rates go up, it’s a less attractive option for investors to buy property as the yields are no longer worthwhile. All these factors suggest property prices will start to fall. The savvier landlords are getting out while they can and selling quickly through property auction. Others will ride the storm until they get back at least what they paid for it.

The only winners in this market are the cash buyers – for anyone else the profit margin is no longer there and won’t be for a while. But for those that can, the competition for good rental properties will be high so expect rising demand and subsequently, higher rental rates.

Interest in auctions on the rise

Although the number of homes coming to market is generally slowing, the number being put into auction is increasing. At My Auction, we’ve seen a 77% increase in lots over the last two months alone. People who do want to sell, want to do so quickly. One of the advantages of selling your property by auction is the certainty of sale. Contracts are exchanged when the gavel falls which creates a faster turnaround time (four weeks), and transparency. This is particularly useful for those who need to complete before their existing mortgage offers expire and they must reapply with higher borrowing rates.

Changes to the private rental market

Earlier this year the government set out a whitepaper with plans to create a ‘so-called’ fairer private rented sector for tenants. The plans include tighter rules which will prohibit landlords from evicting tenants unless they plan to either sell the property or move into it themselves. This leaves private landlords stuck between a rock and a hard place and will eventually discourage many from investing.  The Governments proposed white paper also wants to abolish fixed term tenancies meaning, landlords will no longer be able to sign-up tenants for a 6 or 12 month period. This means all tenancies will be held on monthly rolling contracts – another reason why many landlords will exit the market. In a time when borrowing will stop many from being able to buy a property, the level of housing available could dwindle down to very worrying levels.

Political turmoil and churn of housing ministers

We have had 20 different housing ministers in the past 25 years. If we continue this trend of interfering with the property market every 6-12 months, we will never get stability. While Liz Truss cut stamp duty in a bid to push property prosperity, we are yet to see any tangible results of this.

It doesn’t matter which side of the political fence you sit on, it’s clear to see we will never have a settled, fair and sustainable property market if we continue along the same vein and those who clearly don’t understand the intricacies of the property industry don’t step aside and stop meddling just to win votes.

*Stuart Collar-Brown is Director and Founder of My Auction, the online property auction experts