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Spring Focus: Property Prices

17th May 2023

Spring 2023 Property Update

In our January update, we predicted that the UK housing market might see a correction in the first quarter of 2023 - and with house prices currently sitting an average of 4% below their peak in August 2022 (according to Nationwide’s latest House Price Index), we’ve certainly seen a downward adjustment. The rise in the cost of living, the rapid rise in interest rates to level out inflation together with the reduction in the number of mortgage deals available, have certainly all had an impact on buyers and potential buyers in recent months. According to Bank of England data, mortgage approval rates on Feb were almost 40% below the level a year earlier, and about a third lower than pre-pandemic levels.

But with Nationwide building society reporting a rise in UK house prices this April for the first time in seven months, have we seen the end of this downward trend? As mortgage rates stabilise, will increased buyer confidence lead to higher demand and higher prices? The Office for Budget Responsibility thinks not. They forecast house prices could fall by as much as 10 per cent from their high in the fourth quarter of 2022. Low consumer confidence, the squeeze on real incomes, and mortgage rate rises are expected to contribute to continued falls in house prices. Estate agents however are suggesting that the fall will be less drastic and many are predicting that the market will have found it’s “new normal” by 2024.

So what does this mean if you are looking to buy a property in 2023? Should you hold off on buying your dream home in case prices fall?

There’s no right or wrong answer - it depends very much on your motivation for moving, your current position on the property ladder and how long you plan to be in your next property.

For first time buyers or those in rented/moving from overseas for example, perhaps now is not the right time to buy: Your deposit will go further if house prices continue to fall.

For those buyers already on the property ladder in the UK, looking to find a property that better suits their family’s needs or to be closer to a new school for example, if you are buying and selling at the same time, any fall in property prices will affect your house sale as well as your purchase - so the effect really will be minimal unless you are planning a massive upsize. If you are buying your "forever home" (or at least plan on staying in your new home for a number of years), you are likely to be able to ride through any price fluctuations - living in your property long past this slightly unsettled period in the property market.

One thing is for sure though, with price flutuations on the horizon, being well-informed of the local property market will be crucial to ensure you pay the right price for your new home.