The UK’s economic outlook for 2023, while challenging, looks less severe than many predicted, although price moderation in the region of 5% is anticipated across the housing market. The start of 2023 has proved a mixed bag for agents, mortgage rates are stabilising but caution remains.
The housing market and the economy have always been inextricably linked and the course of the property market in 2023 will no doubt reflect the wider economic environment. Price moderation is anticipated throughout 2023. In Wales, annual price growth is starting to slow. Growth was 4.5% in Q4 2022 compared to 15.3% in Q1 2022 (Nationwide). Month-on-month all major indices indicate prices remain stable or have begun to fall. HMRC estimates that over 1.26 million sales took place in 2022, with sales volumes in 2023 predicted to pare back closer to pre-Pandemic levels of 1 million.
Affordability and the rising cost of living, including mortgages, remain a huge concern. However, the rate of inflation has slowed in recent months and is expected to fall back over the course of the year. Employment levels remain resilient, forecasts for GDP have improved and any recession is expected to be shallower and shorter than first predicted.
With the base rate rising to 4% and expected to peak at 4.5% this year, any further rises are expected to be more incremental. Longer-term 5-year swap rates are falling, a sign of more stability in the market. Moneyfacts report that the best moving home rate for a 75% Loan-to-Value mortgage is now less than 3.5%¹. After falling sharply in the final quarter of 2022, buyer demand at the start of 2023 has rebounded to pre-pandemic levels. Zoopla report current demand is in line with 2018 and is 10% higher than 2019. While the start of 2023 has been a mixed picture for agents in terms of new listings, Rightmove reported that 5th January was their third busiest day ever recorded for requests for agent valuations, an early sign of activity for the year ahead.
¹Moneyfacts.co.uk data as at 09.02.23
A shift back to city-centre living and a return to the office at least part time, combined with demand for value for money and energy-efficient homes, has seen interest in apartment living rise. Hometrack reports that while three-bedroom houses remain the most sought-after property type, over 30% of new buyers are currently looking for an apartment, with 27% specifically seeking a 1-or 2-bed apartment, up from 22% a year ago. Over 70% of new build apartments sold in 2022 boasted the highest EPC rating of ‘A’ or ‘B’, compared to just one in ten resale apartments (Dataloft, DLUHC).
There are over 1.4 million more households in England and Wales than there were back in 2011 and the 2021 census reveals we remain a nation of homeowners. 62% of households are owner- occupied, a fall of 2% over the last decade, with one in five households now living in the private rented sector. Homeowners can either own their property outright or with a mortgage, and for the first time since the census started to record mortgage status in 1991, over half (53%) of all owner-occupied homes are mortgage free. In fact, over 8.1 million households across England and Wales are owned without a mortgage, equivalent to one in three. In Wales, 66% of properties are owner-occupied, down 1.3% from 2011. 38% of all households here own their property outright, an increase of 2.6% from 2011.
