Everything You Need To Know About the 2023 Housing Market

New year, old worries: what’s happening in the housing market?

We’ve asked experts and collated forecasts, 15 in total. On the one hand there’s unanimity - just about everyone predicts price falls - but the scale of the drops varies tremendously.

What’s your view? Let us know in the comments section below this article.

Oh and one more thing - Happy New Year!

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Robert Gardner, chief economist at the Nationwide: “It will be hard for the market to regain much momentum with economic headwinds set to strengthen, as real earnings fall further, the Bank of England moves interest rates higher and with the labour market widely projected to weaken as the economy shrinks. The risks are skewed to the downside, but there is still a good chance that we can achieve a relatively soft landing next year with activity stabilising modestly below pre-pandemic levels and house prices edging lower.”

Forecast - down 5.0 per cent.

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Frances McDonald, Savills residential research analyst: “A return to a more stable political and financial environment following the tumultuous ‘mini-budget’ has led to a more positive outlook among potential buyers and sellers, despite the expectation of further economic uncertainty.

“While there are very clear headwinds … there is a strong seam of demand in the market, but it will be clearly split between those who need to move quickly and more discretionary buyers equally committed to moving but happy to bide their time over the next 12-24 months, to ensure that they get the right home at the right price.”

Forecast - prime regional markets down 6.5 per cent, mainstream market down 10 per cent.

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Nick Leeming, chairman of Jackson-Stops: “We expect to see greater levels of supply enter the market in spring 2023 as long-term mortgage rates begin to level out, giving both buyers and sellers more clarity. House values will feel much more dependent on the slightest variables, from the perfect location to pristine finishes, without the backdrop of unprecedented demand to wipe away any such compromises.”

Forecast - falls in localised markets up to 4.0 per cent.

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Nicky Stevenson, managing director of Fine & Country: “The prime market experiences a higher number of overseas buyers, who have been taking advantage of the value of sterling dropping in recent months. While the mini-budget may have slowed foreign investment, it is believed that the stability in recent weeks will have done much to curb concerns and reinstate confidence in the UK market.”

Forecast - prime markets will outperform mainstream markets.

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Sebastian Verity, head of research at Chestertons: “We expect 2023 to be characterised by a slower property market during which around 25 per cent fewer properties will come onto the market and change hands compared to a ‘normal’ year. The government is actively working with mortgage lenders to avoid additional stress on borrowers so we believe the number of forced sales will be relatively small and the lack of supply, combined with the strong underlying demand for homes, will ultimately insulate the market from any dramatic falls in prices.”

Forecast - price drop of 1.0 per cent across England and Wales and down 3.2 per cent in London.

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Grainne Gilmore, head of research at Cluttons: “Recent signals from the Bank of England and the Office for Budget Responsibility point to the fact that base rates may not rise as high as anticipated several months ago. The outlook now is for base rates to peak at 4.0 or 4.5 per cent. Mortgage rates are already falling back, with some fixed-rate deals under 5.0 per cent hitting the market, and this is a trend that may continue into next year as lenders secure cheaper funding and then compete for business.”

Forecast - mainstream market down 8.0 per cent and prime London down 4.0 per cent.

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Sonali Punhani, head of UK economics at Credit Suisse: “Our view is that the Bank of England is underestimating the persistence and strength of domestic inflation and tightness of the labour market.

There are risks that the Bank remains dovish and hikes rates by less than we expect, which could risk inflation being higher for longer, further sterling weakness, and eventually a more prolonged hiking cycle and higher terminal rates.”

Forecast - price falls of at least 10 per cent.

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 Kris Mclean, managing director of The Guild of Property Professionals: “With almost one in three movers ‘needs-based’, such buyers will present sales opportunities, However, realistic pricing for market conditions will be paramount to achieving a sale as the market re-calibrates.”

Forecast - single digit price falls.

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Richard Donnell, executive director at Zoopla: “The housing market is adjusting to a reset in the level of mortgage rates but the likelihood of double-digit house price falls at a UK level remains low.

“While the outlook for house prices is weak, we see a shift to more needs driven motivations to move in 2023 and beyond which will support sales volumes. Ongoing pandemic impacts, increased labour market flexibility plus more retirement will continue to encourage moves.

“Cost of living pressures will compound these trends encouraging homeowners to consider their next move. The rapid growth in rents, which shows little signs of slowing, will add to cost-of-living pressures and add continued impetus to first time buyer demand.”

Forecast - 5.0 per cent price falls.

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 Halifax home director Andrew Asaam: “It will clearly be a more challenging economic environment and the housing market will continue to rebalance to reflect these new norms. Though the limited supply of properties for sale will continue to support prices, the pandemic-driven surge in demand has receded, and we’re emerging out of more than a decade of record low interest rates.

“Unemployment is expected to rise and reach around 5.5 per cent. This is relatively low by historical standards, but will be challenging for many people. While inflation as a whole may be close to or at its peak, household energy bills are likely to rise again, putting more pressure on household budgets.”

Forecast - 8.0 per cent price falls.

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Tim Bannister, Rightmove property expert: “We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales which would cause a glut of properties for sale and contribute to more significant price falls in 2023”

Forecast - 2.0 per cent asking price fall. 

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Marcus Dixon, director of UK residential research at JLL: “These opportunistic buyers will not expect to pay asking price.  But the vendors who are not distressed will only accept a fall in values to a certain level – i.e more of a discount than a fully blown correction and certainly not a crash.”

Forecast - 6.0 per cent price falls.

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 Lloyds Bank forecast - A 7.9 per cent house price fall is the likely-case scenario put forward by Lloyds - its worst-case scenario sees house prices falling overall by approaching 18.0 per cent. And the banking group says the UK economy as a whole will shrink by 1.0 per cent next year according to its likely-case analysis - the worst case is a huge 4.5 per cent shrinkage.

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Banking trade body UK Finance forecast: the number of property sales will fall 21 per cent from 1.2m in 2022 to 1m in 2023. It suggests the value of lending to homeowners will drop 23 per cent and lending to landlords will fall 27 per cent.

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Office for Budget Responsibility forecast: Prices will fall by 9.0 per cent by the third quarter of 2024, largely driven by higher mortgage rates and the wider economic downturn.

But it adds: “There is significant uncertainty over this forecast given the sensitivity of house prices to mortgage rates and the recent volatility in the bond yields that drive pricing in the mortgage market.”

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*Editor of Letting Agent Today and Landlord Today, Graham can be found tweeting about all things property at @PropertyJourn