2022 has been a busy 12 months for the UK housing market. The year began with huge demand from buyers, and homes were selling quicker than they ever have before. This resulted in months of record-breaking price increases which continued throughout the first few months of the year.
These extraordinary rises in price could not last for ever, and as the year progressed, the market started to settle. Following two years of unusually speedy growth, the housing market returned to the kind of normality we had seen in the years leading up to the pandemic.
Rising interest rates
With inflation rising steadily, exacerbated by the war in Ukraine, interest rates too began to increase steadily. This had the effect of spooking some buyers, who began to delay their house purchasing plans as they saw their mortgage rates climb.
By the end of the year, in December 2022, the Bank of England increased interest rates for the ninth time in the year – from 3% to 3.5%. The Monetary Policy Committee (MPC) voted by a majority of 6-3 to implement this rise, which came at the same time that inflation caused the cost of living to soar.
With such high inflation, financial experts are predicting that rates could go higher still, and could reach 4.5% by the middle of 2023. Figures released earlier this month showed that inflation was running at 10.7% which is more than five times the Bank of England’s 2% target. Interest rates today are currently hight than at any time since October 2008.
Our predictions for 2023
In 2022, asking prices for property in the UK rose by 5.6% - to an average of £359.137. This was nearly £17,000 more than in 2021 where property prices increased by 6.3%.
In its end of year annual prediction, Rightmove has reported that it expects average asking prices to drop by 2% in 2023. However, despite this fall, it will mean that they will still remain higher than they were after the exceptionally busy home-moving period of 2021.
Over the last two years, one of the main aspects driving the growth in property prices was the imbalance of supply and demand. This period saw many more people looking to move than there were properties available to buy.
As the market settled towards the end of 2022, buyers relaxed with more time and space to make sure that they find their perfect home. This means that it is likely that the amount of time a property takes to sell will be increased, and this period is likely to be around 60 days on average in 2023.
Rightmove’s property expert, Tim Bannister said: “After two and a half years of frenetic activity, it’s easy to forget that having multiple bidders immediately lining up to buy your home was the exception rather than the norm in pre-pandemic years, and there will be a period of readjustment for home-movers as properties take longer to find the right buyer.”
Do people still want to move?
The second half of 2022 saw a significant period of uncertainty with increasing interest rates and high inflations. There are signs however, that a number of buyers are now ready to pick up their home-moving plans as we head towards the New Year. In December 2022, Rightmove reported that views of homes for sale on their site were up 11% on the same period in 2021 – suggesting that they are intending to make a move in 2023.
Rightmove’s Tim Bannister added: “We’re heading towards a more even balance between supply and demand next year, but we don’t expect more significant price falls in 2023. This is reflected in our prediction of a relatively modest average fall of 2% next year.”
There appears to be a significant number of people who have factored in their higher mortgage payments, and are still very much intending to move home in 2023. Rob Kennedy, Director of Phillip James Kennedy in Didsbury said: ““The month of December is a good market barometer as we register the most proactive buyers who are planning on moving in early 2023. Whilst there are less viewings and new instructions in December, we encourage as many new sellers as possible to launch their properties mid-December, as they enjoy high levels of internet activity with clients watching video tours and considering moving over the festive period.”
“This culminates in one of the most popular property search days of all which is Boxing Day, where you definitely want your property to have a presence. These are the properties that will attract the first wave of viewing activity in January and sell first.”
Back to “normal”
It seems likely that after the excitements of 2021, the market will return to the type of normal activity that we saw before the pandemic. Whilst there may be a reduction in prices of 2% in the short term, the significant lack of supply in the property market will continue to push prices higher over the long term.
2023 is set to be another impressive year for the UK property market. With supply continuing to be an issue – particularly in the top end of the market – property investment remains one of the most profitable and reliable prospects in the world. Get in touch with our team today to learn about our available opportunities and find your next investment today.