The latest Rightmove House Price Index indicates that the average price of property coming to market in October was a record £371,158, up 0.9%, or the equivalent of £3,398, from the previous month. As a result, the anticipated decline in home prices has not yet materialised. High inflation and rising interest rates are anticipated to make homes less affordable for many potential buyers, slowing market activity as fewer individuals are able to obtain mortgages.
It is anticipated by experts including estate agents in Notting Hill that sellers will react by lowering their asking prices and possibly pulling their properties off the market until they start to notice a more favourable outlook. Without a doubt, the market for home purchases will decline in 2023. Despite the persistent shortage of supply, prices will decline as a result of lower demand. But according to Knight, using the word “crash” should be avoided because it is likely to just fuel the already frantic market.
Growth will restart after a significant market correction, which I predict will happen over the course of around 18 months. Knight predicts a 10% drop in housing values in some parts of the UK, although he also emphasised that there may still be some rise in other regions.
Home Prices Have Increased Too Quickly.
Knight asserted that a fictitious market fueled by the stamp duty incentive is to blame for the excessively quick and steep rise in home prices. Knight pointed out that the last stamp duty holiday fueled housing prices at a time when many people were unable to purchase them. Such stimulus produces abnormal demand, and a correction was always going to occur; additional intervention has only made it worse, he claimed. As a result, Knight explained that the housing market is overdue for an auto-correction and that he anticipates a return of home prices to levels observed a year ago.
Having A Wider Perspective
Although Knight anticipates a fall in demand across the nation, which will lead to a national decline in home prices, he emphasised the need for brokers to evaluate housing data more regionally in order to achieve the best outcomes. Data based on the entire UK is rather useless because a buyer may be making a purchase in a neighbourhood where prices have decreased significantly, but data on house prices will demonstrate a rising market.
Although the South East had a severe decline in housing values following the financial crisis, certain regions did not experience this. Brokers must be aware of which property kinds have experienced the greatest market change in order to better serve their clients, especially in light of the current economic climate.
Newer properties suffered more when home prices dropped during the financial crisis, but this time around, as customers want more energy-efficient homes, it may be the opposite. Therefore, the best thing the sector can do to help in 2023 is to offer much better commentary on housing prices than just headline stats that never give the whole picture.
Are Housing Costs Declining?
The real estate market has exploded, driving up home prices ever since the last financial catastrophe in 2007–2008. A “race for space” that saw many families move up to larger residences outside of the cities was sparked by the stamp tax holiday and low inflation rates, which have also driven up house prices to record highs.
Buyers can no longer afford to invest as much in real estate due to rising mortgage rates, problems with new building, and the end of the government’s Help to Buy programme. Thousands of households are struggling financially as a result of the cost of the living problem, and many purchasers are hesitant to make significant purchases until they see how the property market performs.
For the first time since 2012, experts have predicted a decline in the housing market as a result of demand plateauing. Independent economic research firm Capital Economics has forecast that house prices will decline by about 5% between 2023 and 2024 as a result of rising interest rates.
While they forecast a decline in housing prices in 2023, they also believe that price growth will remain robust in 2022. Savills has also predicted a decline in home prices in 2023, but they believe it would be much smaller, at 1%, and will be followed by several years of modest increase. This is partly because there is a dearth of dwelling supply.
Rightmove, a real estate website, forecasts that the surge in home prices will slow down before 2023. Rightmove predicts that by the end of 2022, house price growth will have decreased from its current rate of 9.7% to 5%. This is indicative of a slowing in the monthly increase in home prices, with prices rising by just 0.4% in June (the smallest monthly rise since January).
Some people have predicted an increase in housing costs over the coming years. According to estate brokers Knight Frank’s five-year home price projection, we can anticipate that house prices will continue to rise in 2023, but at a much slower rate than the record-breaking statistics at the beginning of 2022.
Regional variations in the expansion — or decline — of the housing market are also probably to be seen. With prices in the capital hovering around £520,000, nearly twice the UK average, London property prices remain the highest in the country despite the capital’s slowest growth. Wales is expanding more quickly than any other location or region in the UK, with an annual growth rate that is currently over 15%.