What the rest of 2023 holds for the property market

The market could change this year What is fact and what is fiction? Here, in a special report property expert and Express columnist Jonathan Rolande explains what we currently know about the main parts of the market – and he shares his prediction on what will happen in each area over between now and the area of the year. Jonathan believes we can: Expect a further five percent drop in house prices between now and Christmas Sales volumes to dip dramatically in September Escalating rents which will leave levels ‘unsustainable’ for many tenants A dramatic slowdown in housebuilding. Where we are Britain has suffered the worst house price falls of any major European economy as persistent inflation and rising mortgage rates deter buyers. in the UK fell by 3.1 percent on an annual basis in the first three months of 2023, compared with a one percent fall in Germany and a 2.7 percent rise in France during the same period, according to a report from Knight Frank. In Italy, prices grew by 1.1 percent, while Spain recorded growth of 3.1 percent. Separate data shows that the price of an average family home in Central London has slumped by 7.2 percent since the peak last summer, as soaring borrowing costs hammer buyers in the capital. This means that a home that would have sold for £1.5million last September will now sell for £108,000 less. Experts believe sharp increases in borrowing costs are set to trigger a ‘significant drag’ on the UK housing market as lenders continue to push higher mortgage rates. The fall in house prices we are witnessing is the fastest since 2009.’ Prediction Across the country we are likely to see a further five percent eroded from sale prices this side of Christmas. Those who are employed within the property sector should be concerned not so much with price falls, but instead by the reducing sale numbers This is starting to indicate a shift in the market where many homeowners are opting to wait and see what happens to the market and interest rates, and those that are trying to sell are not yet reducing their prices by enough to encourage the smaller number of buyers now looking. The second half of 2023 looks to be quite bleak for many estate agents who will be unable to build up the financial reserves needed to see them through what is likely to be an even more challenging Winter market. Renting could change Rental sector Where we are There has been a sharp rise in rental prices since Spring 2021 and the latest official Index of Private Housing Rental Price show that it rose by five percent year-on-year compared to 4.8 percent in April. Within England, the highest rise was in the West Midlands (5.2 percent) and the lowest in the North East at 4.3 percent. The change in London was 5.1 percent in May, which was the highest annual rate seen since October 2012. The latest figures from Zoopla last month show that rental inflation has been running in double digits for 15 consecutive months, with inflation hitting 10.4 percent year-on-year. The data also showed that rents take up the highest proportion of people’s earnings in a decade, with average rents accounting for 28.3 percent of a person’s gross earnings. Estate agent Hamptons found the rental price for a new tenancy rose by almost 11.1 percent in the year to April 2023, with the average monthly rent outside London breaching £1,000 for the first time. Prediction With further rises in borrowing rates looking likely and the supply of rental property reducing as landlords sell and aren’t replaced with new entrants, challenging times lay ahead for tenants. Expect further rises in rents although at a slower rate than we have witnessed. We will soon reach a point where further steep rises simply aren’t sustainable. Landlord exodus Where we are The great landlord sell-off is continuing, according to the latest market analysis. Growing numbers of landlords are quitting the sector in the face of higher mortgage rates and rising costs. Eleven percent of homes currently listed for sale on Zoopla were previously rented out – down from a pandemic-driven peak of 14 percent in 2020 when rents were falling in London and other major cities. Historically, around half of these homes listed for sale return to the rental market have been unable to find a buyer – or are bought by another investor. This proportion has fallen to a third more recently as more landlords look to cash in on capital gains to pay down debt or fund retirement. Figures from the Ministry of Justice show that no fault evictions were up by 15.8 percent in the three months to March. Rising interest rates are partly to blame for the increase as landlords look to sell or re-rent at higher rates. Zoopla said last month that 11 percent of homes listed for sale on the site were previously rented out, suggesting that some landlords were selling their properties due to higher mortgage rates. The asking price on previously-rented homes is 25 percent lower than ex-homeowner properties, making them attractive to first-time buyers. Trending SUBSCRIBE Invalid email We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info Without capital growth, who would choose to be a landlord? Higher rents have gone some way to balance the books but many with a mortgage do little more than cover the interest each month. More landlords will try to quit this year but the number may not be as high as feared. This is because capital values and saleability will fall leading many landlords to take a wait and see approach. Mortgages Where we are The Nationwide Building Society has said despite the higher interest rates, the sharp rise in rents and inflation more generally, is continuing to make it difficult for many prospective buyers to save for a deposit. A 10 percent deposit on a typical first-time buyer home is equal to around 55 percent of gross annual income, which is ‘marginally above the levels prevailing before the financial crisis struck in 2007/8. Recent reports also highlighted how the small print of Chancellor Jeremy Hunt rescue deal with banks excludes buy-to-let mortgages. We are yet to see the hoped for interest rate war to attract customers that might have driven down rates. Instead, gloom in the markets has made the opposite happen. Rates have risen even before the Bank of England hiked base rates which is unusual and worrying. Mortgages will almost certainly become even more expensive as we enter the second half of the year and higher rates are now the new normal. could continue to drop