While the pandemic was a time of unprecedented change and struggle for many, it provided an unexpected boost for the UK property market. Amid global turmoil the UK housing market saw an upturn as the Government introduced stamp duty relief, interest rates lowered and people stuck indoors took the plunge with a new home. The property price acceleration continued in 2021 but by the end of last year a number of events had combined to suggest a clear change of mood and 2023 has now arrived as a more cautious time for anyone looking to move.

The grip of the cost of living crisis has undoubtedly played its part in that, with mortgage lender Halifax reporting that average house prices had fallen by 1.5% in December 2022 alone, the fourth consecutive month in which they had reported a decline. They also reported that the average UK house price had fallen from £293,922 in August to £281,272 in December, clearly showing that the pandemic resilience was being eroded.

What is the state of the UK housing market in 2023?

And while there are short term signs of a recovery – RightMove reported a 0.9% jump in house prices in January 2023, while the Office for National Statistics claim house prices were actually up 10.2% on the year to November last year – the full story is that these are mere blips in an overall story of decline and the average house price at the end of 2022 was still much lower than it was 12 months earlier. Nationwide also reported a monthly decline at the end of 2022, with average house prices 2.5% lower in December than in August, roughly following the trend reported by Halifax. So why is this happening and what does it mean for people looking to move in 2023?

It is being suggested that people should largely ignore the chaotic final quarter of 2022 and take a more long term view of the housing market, always a wise consideration. The effects of Kwasi Kwarteng’s mini-budget in September 2022 increased the costs of borrowing dramatically and put house prices under pressure, but it is expected that interest rates will normalise and that inflation will also halve in 2023, giving some buoyancy to the housing market more comparable to the 2021 mid-pandemic period. Currently, high inflation and the pressure on household spending is being combined with high mortgage rates, but if mortgage rates drop as expected and become more normal and affordable in 2023, house prices should fall and buyers should return to the market.

What kind of properties are looking attractive in 2023?

Although the Help To Buy scheme is no more, there are other schemes available to help house-buyers and particularly first-time buyers, such as First Homes. The Government’s commitment to building 300,000 new properties each year is still going strong, but the market for flats rather than houses is one to look out for. Schemes such as Pocket Living (small, affordable apartments around 20% below market value and mainly in London and the Home Counties) have kick-started a creative trend of innovative, shared living and working spaces.

Numerous city centre developments are inspiring people to invest in buy-to-let properties where there is huge demand as first-time buyers continue the habitual struggle with buying property. And people are coming round to the idea that flats and apartments are more affordable to live in, easier to heat and furnish and are also closer to job availability.

Zoopla reports that apartments currently make up around one in five homes in the UK, but that price inflation for flats is lagging far behind houses. In the UK, houses are currently valued at just over twice the price of flats, the highest price differential in over 20 years. This is partly explained by the pandemic energising people with a search for space and luxury, and homes on the coast, in rural areas or homes with history and style. As a result, flats enjoyed little gain in value, but anyone searching for a flat to buy now, could be ready to clean-up.

So is 2023 a good time to buy a house?

Undoubtedly 2023 is expected to be a slower market, but if you are playing the long game it could still be a good year to buy. If you can afford to play the long game and ride out any volatile periods in between. The 2008 credit crunch resulted in a 15% drop in house prices, but if you bought a house in 2002 and sold it in 2022, you will have reaped the rewards of selling at 161% more than you paid, according to estate agent’s Hamptons.

Volatile markets can quite easily wipe out your equity, but that 2008 example shows that ultimately the market will always recover, you just need to make sure you monitor the recovery and sell at the right time. And of course you need to make sure you can live comfortably in the meantime. Despite the current recession not expecting to be as extreme as first thought, we are still in a prolonged recession, and the number of house sellers are dropping because people are more risk averse, particularly in a cost of living crisis. Less supply means a lot of people are putting off their next move, and because the benefits of moving house is always down to your personal circumstances, 2023 is, more than ever, a time to plot your next move very carefully because the right move is still definitely out there, you just might need to be a bit more patient.

If you need more dedicated and individual advice on your personal circumstances with regards to moving home and the current UK housing market, then contact our residential property or new-build conveyancing team today.


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