IT has been a rollercoaster year in the housing market, so it’s only right to be curious about what could happen to house prices in 2023.
Property prices came under immense pressure after mortgage rates shot up following former Chancellor Kwasi Kwarteng‘s disastrous mini-budget in September.
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This caused a house price slowdown – with the biggest monthly drop in over a decade taking place in November.
The average UK house price stood at £285,579 in November, down from £292,406 – a drop of more than £6,000, according to Halifax.
Property prices surged last year due to pent-up demand following coronavirus, a lack of homes on the market driving demand up and the end of the stamp duty holiday.
In September, the government announced a new cut to stamp duty in a bid to boost economic growth.
But the new government under Prime Minister Rishi Sunak has confirmed that it will axe the stamp duty cut from March 31, 2025.
The Bank of England (BoE) also hiked its base rate to 3% in November, piling pressure on mortgage owners.
It increased its rate from 2.25% to 3% – the biggest single rise since 1989, in a bid to slow soaring inflation and encourage people to save.
The BoE used its announcement as an opportunity to revise its predictions on how much interest rates will rise in future, and this has brought some relief to mortgage bills.
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In November, it said that rates would hit a maximum of 4.6%.
But with a cost of living crunch leaving families strapped for cash, saving for a property has never been harder.
This is coupled with the prospect of a recession in the New Year.
Will this mean demand for homes goes down, and house prices continue to fall along with it?
The Sun asked three property experts – Carmen Green, mortgage advisor at brokerage Xpress Mortgages, Nicholas Mendes from broker firm John Charcol and L&C Mortgages director David Hollingworth about what they think will happen to house prices next year.
Will house prices go down in 2023?
Mr Mendes said house prices are expected to take a dip across the UK as mortgage rate uncertainty continues, making people more reluctant to sell or buy.
He said: “With sellers now looking for a quick sale, while property prices are expected to reduce in the months ahead, there seems to be going confidence that buyers can now negotiate with the seller to get a better deal.
“This is rather than meeting the asking price, or miss losing out to other buyers, as has been the case.
“The uncertainty will naturally be at the forefront of people’s minds and, as a result, we will not see the same level of properties coming on to the market.”
He added that the UK’s slow march into recession is keeping many would-be first-time buyers away from entering the market.
Mr Mendes said: “With any recession, homeowners tend to hold back any plans to move and look to remain in situ while they wait and assess their options.
“With a lack of demand, property transactions also tend to reduce resulting in a dip in property prices.
“Around 1.8million homeowners who are due to refinance next year will also see higher borrowing costs.
“This could also prompt many with mortgages now unaffordable to put properties on the market which could also lead to a further reduction in prices.”
I’m a first-time buyer – should I buy?
Ms Green said despite prices falling and demand waning, there will always be people who need to sell a property.
But Ms Green said first-time buyers should be looking to manage their expectations as uncertainty over mortgage rates continues.
She said: “As hopeful buyers let go of any expectation of rates coming back down to the historic lows, they will need to adjust to the new normal.
“This will help them to take the next steps in their home buying journey.”
With rents also soaring, Ms Green said more people may consider buying for the first time as the gap between rental costs and mortgage payments shrinks.
She said: “Many landlords are being forced to increase rents to make sure their investment, or buy to let properties, remain profitable.
“This may close the gap on the difference in rental costs vs mortgage payments, encouraging tenants to make the jump into homeownership.
“In addition, some landlords may be forced to sell, which would bring more properties to the market.”
I’m a homeowner – what if I move next year?
The spike in mortgage rates following the Mini-Budget has affected consumer confidence, Mr Hollingworth said.
He noted homeowners should be watching interest rate movements closely.
He said: ” Fixed rates have been coming back down from the peaks they hit following the mini-Budget.
“They will still be higher than the ultra-low levels of a year ago but although the base rate is likely to continue to climb in the near term it may peak sooner than previously anticipated.
“That may help borrowers assess where they stand and ultimately see any pent-up demand feed through next year which could help limit price drops.”
