Disappointing month may signal a terrible year ahead, but some argue that a soft landing is still possible
Disappointing December housing sales data may point to a buyer’s market in early 2023, along with pressure on those seeking refinancing. But there are differing views on whether prices are on the way to a serious drop, or a soft landing.
House price growth fell for the fourth consecutive month, on an annual basis, dropping to 2.8% in December 2022, according to new data from Nationwide.
Lewis Shaw, founder of Teesside-based mortgage broker Riverside Mortgages, said the slump in the Nationwide house price index was expected.
“Consumer sentiment dropped off a cliff, positive economic news was harder to find than Lord Lucan, and to top it off, Harry Kane volleyed a penalty with a trajectory not seen since Liz Truss and Kwasi Kwarteng put a bomb under mortgage rates,” he said.
Shaw said we are well and truly into a buyer’s market.
And with 1.8 million mortgage holders needing to remortgage in 2023 and inflation still in double figures, Shaw believes the pain has not even started.
“I expect to see forced sales, a massive increase in debt consolidation and adverse lending, along with a buy-to-let fire sale, all contributing to an Annus Horribilis,” he added.
Is price pressure deepening?
Gary Bush of Potters Bar-based MortgageShop believes the continued decline in annual price growth in December was always on the cards as the fallout from the mini-Budget continued.
He added that property prices in 2023 are almost certainly set to undergo a correction after the giddy highs of the past two years and the strength of the economic headwinds.
“However, if fixed-rate mortgages keep reducing, as they currently are, then with the shortage of decent available properties across the UK and a strong jobs market, we may get away with a temporary rather than a long-term reduction in house prices,” Bush said.
While Bush is expecting 2023 to be turbulent, he said it may not see the dramatic falls many are predicting.
The avalanche scenario
“These are the snowflakes that started the avalanche,” said Samuel Mather-Holgate (pictured) of Swindon-based advisory firm, Mather & Murray Financial.
Mather-Holgate said people will not be in a rush to buy properties at the top of the mountain in the new year.
“There is plenty of room for prices to fall and I expect little activity in the market until we know where prices decide to settle and that will not be until late Spring,” he said.
Mather-Holgate added that there will be many distressed sellers needing to offload their properties when they cannot cope with cost-of-living increases.
Hopes for a reset, not a recession
“This data was no surprise given that we had a World Cup, a growing cost-of-living crisis and then Christmas, with most people putting their home-buying dreams on hold,” said Mike Staton, director of Mansfield-based mortgage broker Staton Mortgages.
He believes that January and February could be a good time to start looking, as banks will intend to get 2023 off to a strong start and buyers will hold the bargaining power.
“Due to the strong jobs market and weak supply, we are less likely to see a crash and more a housing market reset,” Staton said.
Correction rather than crash
Kylie-Ann Gatecliffe, director at Selby-based broker KAG Financial, does not think 2023 is going to be all the doom and gloom that many are predicting.
“Even if there is a 10% drop in house prices, official data shows that, over the year to August, we saw an increase of 13.6%,” she said.
Gatecliffe said that there may be less of a housing crash and more of a correction to pre-pandemic prices.
As busy as the past two years have been with property sales, she said, it has been tremendously difficult for first-time buyers to get onto the ladder, with many being outbid or simply being priced out of an area.
“When it comes to selling and buying, the reduction is usually seen on both sides, so any drop in prices often negates itself,” Gatecliffe said.
What are your views on the latest house price data from Nationwide? Let us know in the comments below.
