What will happen to the property market in 2023?

Well, if you listen to the mainstream media – especially The Telegraph – you would think the property market is going to crash and burn this year.

Sadly, headlines of property price crashes do help generate lots of views for the media, so it’s inevitable that a slight ‘whiff’ of some price falls and some of them go wild, unfortunately at the expense of good informative reporting.

The issue is that forecasting the property market for 2023 is extremely difficult, and the only honest answer we can give is that we really don’t know what’s going to happen and that’s because we have an extremely unusual set of circumstances we have never seen before.

Jump to:

What's different about the property market in this recession?

What are the forecasts for 2023?

National average property price forecasts

Regional property price forecasts

Transaction forecasts

Should the market impact on your purchase or sale this year?

Critical thoughts for buying this year

When will we know what’s happening in 2023?

What’s different about the property market in this recession?

Since Brexit, there has been talk of property prices falling and indeed, some of the forecasters have been right – as long as you restrict your geography to some parts of London and Aberdeen!

Source: Land Registry

• Average price falls: 23%
• Property prices have fallen by 29% for flats
• Property prices have fallen by 16% for flats

Source: Land Registry

• Detached house price growth: 26% increase over 5 years
• Flat house price growth: 9% increase over 5 years
• Average property price increase: 16% increase over 5 years 

As you can see, Aberdeen prices for both flats and houses have been falling since 2015, while in London, for some, prices started to flatline and for some, have fallen since 2017.

Elsewhere however, property prices and indeed rents for many have been rising pretty rapidly, but there is a big difference between prices rising and prices recovering and, in the main, I and others think that property prices during the pandemic recovered to where they should have been – and therefore we haven’t necessarily seen a ‘boom’ which you would typically do before property prices crashed.

Here’s a summary of what’s different with the property market versus previous economic and property crashes:

1. Over 50% of people own their home outright, so no mortgage
2. Of those that own a home, most have been on a repayment mortgage since at least since 2014
3. Mortgage holders since 2014 have been assessed at 6-7% mortgage rates – not the 2-3% they were on
4. Of those that bought property towards the end of 2021 and 2022, they should be on good fixed mortgage rates and also will have seen an uplift in value in 2022 that was unexpected – around 10% more than forecast.
5. First time buyers will fall in 2023, but with more people downsizing, this will still allow upsizers to move whereas in the past, FTBs would have held back the market and substantially reduced demand
6. 50% of buyers either buy with cash or with LTVs of 50% or less, so are not as reliant on mortgages as we’ve been before.
7. More people are renting, particularly those in industries which tend to suffer more during recessions, such as catering and entertaining, meaning less households on the ladder to be repossessed.

So, in theory, with such a high level of equity and people not – again in theory – over borrowing in the run up to this recession and with the addition of there not necessarily being an unsustainable ‘boom’ in the first place, there shouldn’t be the huge numbers of repossessions that we saw back in the 1990s and indeed during the credit crunch (2008).

But and it’s a big but, we have these economic issues which could mean that any of the positives of the property market are overridden by the negativity of the economy:

1. Inflation at 10% is making it tough on everyone’s pockets
2. Energy costs if they remain high could impact on people’s ability to pay their household bills
3. Mortgage rate rises have been faster than expected – although they are starting to fall again in 2023 and are expected to fall back to the 4% we saw prior to the mini budget in September 22.
4. The huge whammy of costs for buy to let investors, especially if borrowing and the ‘anti landlord’ sentiment which will continue in the run up to the election could cause a further sell off by landlords, reducing demand and increasing supply.  
5. Uncertainty may start creeping into the buying/selling market if the bad economic news continues.

What are the forecasts for 2023?

So there are two schools of thought on what will happen to property prices this year:-

1. Optimists, mostly property data experts, suggest around 5-10% falls
2. Pessimists, often more economic experts, suggest around 20% which is what prices have fallen by in previous recessions

Whatever does happen I can guarantee that these falls will be inaccurate for buyers and sellers and homeowners. The reason being is that there isn’t, in my view, an ‘average’ property anymore. Property prices are falling, rising and staying the same in many areas across the country.