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There is no doubt that after a manic few years in the property world, the market has slowed down a little and prices have even dropped slightly. According to mortgage lender Halifax, house prices decreased by 2.3% in November 2022 and a slightly slower 1.5% decrease in prices in December 2022. But after a turbulent time with the global pandemic, the cost of living crisis, Brexit, the effects of inflation, and the war in Ukraine, this leaves us wondering, are we edging towards a property crash?

Though experts differ on whether there will be a crash or not, many have identified that house prices will decline in 2023. JP Morgan and Credit Suisse suggest a decline of 10%, Lloyds Bank is forecasting a fall of 8%, and the Office for Budget Responsibility projects a drop of 9%. According to the Office for Budget Responsibility, UK house prices will fall until the autumn of 2024. The fall in prices is likely to differ across regions, with London seeing the slowest growth yet still maintaining the highest prices in the UK, especially in central London, where there is a larger market for international buyers.

Part of the slump in prices is due to rising interest rates and the effects of Kwasi Kwarteng’s mini-budget in September, which startled the markets. Households are now facing larger monthly mortgage repayments as a result, and though mortgage rates have decreased since the mini-budget, they are still higher than last year. For example, households are currently paying the largest portion of their income on mortgage payments since 1989, and the Bank of England is predicted to raise interest rates again from 3.5% to 4.75% in 2023.

The accumulation of the cost of living crisis coupled with high-interest rates will limit how much people are able to spend and save to purchase a home. However, falling property prices may seem advantageous for many buyers.

“There’s no doubt that the property market is still reeling from the effects of the mini-budget last year. Many mortgage products were pulled, and lending approvals were reduced in the immediate aftermath. This certainly contributed to price decreases at the end of the year. Thankfully many mortgage products are now returning.”

Hema Patani, Partner and Residential Property Solicitor at BHW.

Will 2023 Be a Buyer’s Market?

Let’s not forget that whilst the mortgage interest rates are high, savings and ISA accounts will also offer high-interest rates (up to 7% according to the Money Saving Expert), allowing people to accumulate more interest than they were last year for instance when savings interest rates were at an all-time low of around 0.85%. Equally, lower house prices allow people to put more money down and gain more equity in a property which allows them more options when it comes to finding a good mortgage deal.

Cash buyers are the ones who are likely to benefit the most from a potential market crash since they do not need to worry about increasing mortgage rates and can take advantage of the Stamp Duty holiday too.

Whilst there are predictions that the housing market will recover by 2026 as inflation reduces and interest rates begin to decrease, no one knows how the next year will play out. The market is volatile and can be affected by many factors such as political instability, inflation, or regulation changes. The best solution is to buy or sell regardless of what the market is doing and find opportunities that are offered such as shared ownership schemes, fixed mortgage rates, or the Mortgage Guarantee Scheme.

There’s no doubt that trying to predict future housing trends is almost impossible. Weighing up your own unique circumstances and deciding if now is the best time for you personally is always the best approach. Waiting for a drop in house prices could be cancelled out by further interest rate rises. If house prices do decrease further due to there being fewer buyers out there in 2023, then this could mean better negotiating power for those able to take advantage.

Hema Patani, Partner and Residential Property Solicitor at BHW.

BWH Solicitors is the leading residential property law firm in Leicestershire and is ranked in the top ten real estate firms in the East Midlands by the Legal 500 guide. We pride ourselves on giving our clients a seamless and efficient end-to-end conveyancing service and adhere to high-quality industry standards. We work with many estate agents and financial advisors as their preferred conveyancing partners. Due to our proactive approach to progressing our clients’ property transactions, we are constantly being referred time and time again. 

Whether you are a property professional, seller, or buyer, we can help with your residential conveyancing queries. To request a personal conveyancing quotation, or to discuss setting up a professional referral relationship with your business, please call us on +44 (0)116 289 7000 or send us an email at conveyancing@bhwsolicitors.com.


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