Research expert predicts what will happen to house prices in 2023
House prices have risen by 7.2% in the last year, according to property listing platform Zoopla.
This annual increase means that the average UK property now costs £17,500 more than a year ago. However, the underlying rate of quarterly price inflation has slowed from more than 2% during the summer to just 0.3% in the last three months – an annualised growth rate of just 1.4%.
“We expect to register quarterly price falls in the first half of 2023, dragging the annual growth rate into negative territory by mid-year,” Richard Donnell, executive director of research at Zoopla, said. “It’s the same pattern across all regions of the UK as weaker demand from higher mortgage rates, cost-of-living pressures, and low consumer confidence hits price growth across all markets.
“Our national view is UK house prices falling by 5% next year. But price falls in more affordable markets are likely to be below average as the hit to buying power from higher mortgage rates will be less than in the high-value markets.”
The latest Zoopla House Price Index also revealed that sellers continued to accept larger discounts to asking prices to achieve sales. The gap has grown to 4% in the last month, down from 0% in early October. Donnell said they expect discounts to widen further in 2023, though at this late stage in the year, fewer sellers reduce asking prices as they wait to see what the market holds in January before making any changes to pricing.
Zoopla said affordability is the primary factor looking ahead to 2023 and beyond, and will be influenced by mortgage rates, household incomes, and the actual level of house prices.
“The more unaffordable a local market, the more households are priced out, weakening demand and impacting sales volumes and pricing,” Donnell explained. “The opposite is true in more affordable markets where house prices tend to be lower.”
A key trend over the last two years has been the search for space as a proportion of buyers have looked to relocate to rural and coastal areas. This trend, Zoopla noted, is reversing as buyer interest is getting stronger in urban locations where jobs are being created and there are more services.
Jack Roberts, chief executive at home moving platform SlothMove, remarked that the cost-of-living crisis and the prospect of a new year dominated by recession means “heads are now ruling hearts in this market.”
“For many buyers, the game plan for the next few months will be to simply sit on their hands and wait to see how far prices move in their favour,” Roberts said. “The race for space has turned into a shuffle for stability as house hunters are increasingly shunning a place in the country in favour of tightening their belts in commuterville.”
He added that while potential property buyers may not be tired of London, negative growth suggests many people are fed up with its property values and looking to get the benefits of city living elsewhere.
“Yet, as wage increases continue to outstrip house prices, don’t be surprised to see the capital bounce back with a vengeance sooner than expected,” Roberts concluded.
