We started 2022 with months of record-breaking house price increases, with huge levels of demand from buyers, and homes selling more quickly than ever before.
As the year progressed, we started to see the market settle down after an exceptionally busy two years and were returning to the kind of housing market we’d seen in the years prior to the pandemic.
When interest rates started to increase, and some buyers put their moving plans on hold as mortgage rates also climbed.
What could happen to house prices in 2023?
In 2022, we saw asking prices in Great Britain rise by a further 5.6%, to an average of £359,137. This was almost £17,000 higher than in 2021, when prices increased by 6.3%.
In 2023, its now being forecast that average asking prices will drop by 2-5%, which means prices will remain higher than they were after the incredibly busy home-moving period of 2021 but start to fall ever so slightly as the year progresses.
One of the main drivers of the house price growth we’ve seen over the past two years has been the imbalance of supply and demand, with far more people looking to move than there were homes available for sale. In a more settled housing market, buyers will have the time and space to make sure they find the right home for them. As a result of this, we anticipate the time it takes to sell a home increasing to what we’d expect to see in a more ‘normal’ housing market, of around 60 days.
The property expert, Tim Bannister, from Rightmove says: “After two and a half years of frenetic activity, it’s easy to forget that having multiple bidders immediately lining up to buy your home was the exception rather than the norm in pre-pandemic years, and there will be a period of readjustment for home-movers as properties take longer to find the right buyer.”
Are people still looking to move?
After the uncertainty brought about by interest rate rises and high inflation, we’re seeing signs that some buyers are ready to get started with their home moves as we head into the New Year. This month, views of homes for sale on Rightmove are up 11% when compared to the same period in 2021, suggesting that 2023 moves are on the cards for those who are able to do so.
Should we trust house price forecasts?
Although property price predictions arguably influence public sentiment, forecasts should always be taken with a pinch of salt. A number of major organisations, including the Bank of England, Savills and Knight Frank predicted house prices would fall in 2020 following the outbreak of Covid-19.
It seemed the only logical conclusion, particularly when the property industry effectively shut down - not to mention the entire country.
However, these predictions did not foresee the extent of furlough or the stamp duty holiday. Nor did they foresee the extra importance and value people would place on their homes once they were spending almost all their time within them. In fact, prices increased by 8.5 per cent in 2020, according to the ONS.
Many may argue that this time it's different due to 40-year high inflation and the highest mortgage rates in more than a decade but as we have seen in the past, the property market is capable of defying all expectation and we never know what economic factors may change.
Higher interest rates may well be the new normal but that isn't guaranteed. It is also conceivable that next year inflation could fall, or that mortgage rates could fall or our fears about a recession and rising unemployment may never transpire.
Ultimately, nobody knows what the future holds and trying to time the market based on house price predictions is not always a sound strategy. We recommend always speaking to a mortgage broker or agent first.