Another year over, a new one just begun.
New Year resolutions made (and already broken?)
What will 2023 have in store for the property market and those who wish to buy, sell, let or rent property in the year ahead?
At their December meeting the Bank of England Monetary Committee raised the UK base rate to 3.5%, its highest level for 14 years. This is however unlikely to affect mortgage rates (unless tracker or standard variable rates) as this rate increase had already been factored into borrowing rates.
Lenders are beginning to offer longer term mortgages and seeking to mitigate the effect of these increased costs.
Around 150,000 borrowers every month have fixed rate mortgages where the present deal will expire in 2023 and arranging new deals will undoubtedly be at higher rate. This, coupled with higher cost of living expenditure such as energy expenses is putting pressure on households and affecting their ability to afford either rental or purchasing costs.
Inflation is showing signs of easing and the Bank of England will be hoping that their interest rate measures will force down inflationary pressures but there will, undoubtedly, be some pain for everyone during this period.
Rents have continued to increase as demand exceeds supply and with the private rental sector shrinking as a number of landlords leave the sector. It remains to be seen, at what stage, affordability puts the brakes on this upward trajectory.
Property prices are easing back and there are many forecasts that show property prices falling during 2023. These reductions in value range from around 2% to 25% with the likely reduction probably circa 10% which will take values back to where they were a year or so ago.
Of course, if values dop and you are looking to move “up market” the gap between your selling price and buying price will close and ultimately become more affordable.
Crucially for those selling’ it will be key not to overprice and end up “chasing the market” downwards as the market will not be baling anyone out over the coming months.
It is the likely volume of transactions that will affect the market and economy the most. During the pandemic period, the Government intervened and removed SDLT (from most transactions). This artificial boost saw the number of sale transactions rise to around 1.2 million transactions per annum. We expect this number to reduce closer to the long term “run rate” of 900-1,000,000 transactions per annum.
Despite the financial and economic pressures, unemployment is not expected to rise dramatically with the number of repossessions not expected to rise significantly either.
It is undoubtedly going to be a challenging time over the next 12-18 months. Much belt-tightening will be undertaken and some people’s plans will be put on hold but we are confident that most people will be able to come through the period scarred but not destroyed by it.
The team and I are highly experienced and the need to get sound advice has never been more crucial. We shall be happy to discuss your personal situation in confidence and agree the best way forward for you.