What’s happening to UK house prices in 2023?
Dale Anderson
Director at Fabrik Property Group | Multi-Award-Winning Property Investment Expert (￡2bn+ Raised) | Advisor to HNWIs & Family Offices | AI & PropTech Specialist
It is no secret that UK house prices have been on a roller coaster in recent years. With prices fluctuating, many people wonder what the outlook for UK house prices in 2023 will be.
In this blog post, we look at the current market conditions, economic predictions, and other factors that could affect UK house prices in 2023. We’ll also provide some tips to help you decide if now is a good time to invest in the UK housing market. So read on to learn more.
The current situation
According to the latest house price index from?Zoopla, annual house price inflation has slowed to 5.3%, down from 8.6% last year, as buyer demand and sales volumes remain 20–50% lower than a year ago—but slightly ahead of pre-pandemic years.
Broadly speaking, sellers are accepting an average 4.5% discount off the asking price to secure a sale, the highest in five years, meaning they have to forgo a third of their pandemic house price gains, equivalent to an average discount of ￡14,000.
This has seen a broad-based repricing of housing underway, with UK house price inflation set to move into the negative year-on-year range by summer.
Despite this, given the current economic situation, the resilience of the UK’s property market is on track for modest price falls of up to 5% and 1 million sales in 2023.
A return to pre-pandemic market conditions
As we move into 2023, there are two different views of the current UK housing market. One that looks at year-on-year performance and one that looks at how the market has returned to pre-pandemic levels.
What’s interesting is that buyer demand rebounded in the first two months of 2023; however, it remains 50% below the level recorded a year ago. Despite this, new sales volumes in early 2023 have recovered and are now 24% lower than last year.
Instead, current market conditions look more like those seen in pre-pandemic years, with demand 8% higher than it was this time last year and sales up 1%. This suggests that the UK housing market is returning to its pre-pandemic levels and that house prices are expected to continue to rise over the course of 2023.
However, due to the economic uncertainty caused by the pandemic, there is still a great deal of uncertainty surrounding the future of UK house prices. The current trend could reverse, and prices could fall, or they could stay steady as they have been in recent months.
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What this means for buyers
For buyers, the current situation in the UK housing market is an attractive one. The availability of homes for sale has increased by over 60% compared to last year, with the average estate agent's office now having 24 homes for sale compared to 15 a year ago. This creates more choices for home buyers and helps reduce the upward pressure on house prices.
Almost 40% of homes listed on Zoopla have had their asking prices reduced, and these reductions are consistent across regions and property types. This means that there are some great opportunities to find attractive properties at competitive prices. For those looking to invest in property, this is a good time to do so.
What does the future hold?
The transition to a buyers’ market is accompanied by nationwide repricing as buying power begins to recover from the 6% mortgage rate highs of late 2022. This means that, on average, buyers now have 20% less buying power compared to a year ago, when mortgage rates were 2%. Many buyers will look to buy smaller or cheaper homes, while others may inject more equity into purchases or be in a position to spend more on mortgage repayments.
Zoopla’s house price report has registered modest monthly price reductions, with the annual rate of inflation now at 5.3%. However, Zoopla’s index is expected to continue to show minimal month-on-month price reductions over the next 2-4 months, with the summer likely seeing modest annual price reductions of up to 2 or 3%. However, it’s worth noting that Halifax’s latest?UK House Price Index?has reported a +2.1% average house price growth between February 2022 and February 2023, with house prices still above pre-pandemic values.
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