Daniel Chard, Partner at Bird & Co, explores his predictions for the housing market in 2023.
2022 has been a turbulent year for the property market, with house prices rising then falling, interest rates soaring, and rental prices continuing to grow.
Despite home values post-pandemic skyrocketing, the housing market is now beginning to slow down with the annual rate of house price growth slowing to 4.7%, down from 8.2% in October. This decrease has been the biggest drop since the beginning of the financial crash in October 2008. The fall is also the third in a row, with property market analysts forecasting this decline to continue throughout the new year.
Possible reasons for the slowdown in the housing market include a shortage in housing stock and high demand for properties. It has also likely been amplified by the current cost-of-living crisis, meaning fewer people can afford to stretch themselves to buy homes.
Other experts attribute the decline towards the former Prime Minister’s economic agenda, which triggered a collapse in British financial assets, causing interest rates to soar.
While there is no exact answer to what the housing market will look like in 2023, there are certainly a number of consumer-led predictions that can be made for prospective house buyers.
Less Demand from First-Time Buyers
With the current cost-of-living crisis, fewer people may be feeling economically secure this year. For first-time buyers, who may already be stretching their finances, house-hunting could be put on hold until there is more certainty on which way the property market is going to head.
Rightmove’s monthly house price index showed that first-time buyers were the most hesitant to purchase a house, with the demand down by 26% in October.
Interest rates have also shot up in recent months, which has added hundreds of pounds to mortgage payments. Property website, Zoopla, has reported that demand for housing has dropped by 44% since the government’s mini budget, which sent interest rates soaring. The average a year ago for a two-year fixed rate was priced at 2.25% but, in the past few weeks, new rates have reached above 6%.
With mortgage rates rising and people becoming more conscious of their budgets, the demand from first-time buyers is expected to be lower in the new year.
Property Prices Remaining Low
With there being fewer buyers and demand for homes, there is less need for sellers to make offers above the market price. This confidence could lead to the recent reduction in housing prices either continuing or plateauing.
If mortgage rates stabilise and people become less conscious of their heating bills in the Spring, the market will improve further.
A Growing Demand for Sustainable Housing
An increase in demand for sustainable housing can be attributed to a growing eco-conscious attitude, meaning people are now favouring greener and more sustainable purchases. A recent survey found that 82% of buyers said they would be willing to pay more for an energy-efficient property.
This demand can also be seen in the growing popularity of energy-saving materials such as solar panels and heat pumps, as well as the government’s ‘Future Homes and Buildings Standard 2025’. These are a set of objectives that will ensure every new build home after 2025 will cut carbon emissions by 75 to 80% compared to the homes built before.
On top of this, as household budgets have become tighter due to the cost-of-living crisis, electricity usages in homes are a worry for many people. With the cost of repairs and maintenance on things such as boilers, many people are now opting for more efficient uses of energy. When it comes to prospective homebuyers, this could mean properties that are well insulated and have solar panels fitted would be a more favourable option.
Weather Dependent Homes
After the low rainfall and record-breaking temperatures this summer, which saw Europe’s worst drought in 500 years, the prevalence of weather-dependent homes has become an increasingly popular choice for prospective buyers.
Green living mostly concerns the conservation of water, however, weather-dependent homes are predicted to pick up all over the globe, and not just be exclusive to drought-stricken spots.
In particular, younger generations have become increasingly invested in sustainable living. New types of sustainable housing include rainwater harvesting architecture, drought-tolerant landscape design, and rain chain drainage.
That said, droughts are not the only concern; extreme weathers come in all forms, and the UK could see flooding increase as the sea level rises. A scathing article by the Guardian criticised plans for building thousands of homes on flood plains, with the climate crisis looming. Despite the low availability of housing, perhaps making these riskier homes appealing, we predict house buyers may be less likely to buy in these areas as climate change continues.
People Moving to the Countryside
With average house prices still being considerably more expensive in the city than in the countryside, relocation could be on the cards for a number of people next year. This shift can also be attributed to post-pandemic work-based habits such as the growing popularity of flexible working.
As a result, people's needs when house hunting are changing, and it is expected that individuals will be able to be far more flexible with where they choose to live.
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If you are planning to purchase, sell or remortgage your home in 2023, our friendly conveyancing solicitors can provide the assistance you need for a smooth transaction. Get in touch with our conveyancing solicitors by giving us a call or getting a quote online.