New report from mortgage broker reveals all
Residential property prices will decrease by almost 11% while rents will continue to increase by 12.9% in 2023, according to mortgage broker Finanze, which has published its inaugural Annual Research Report.
“Finanze expects home prices to fall throughout 2023 as demand slumps due to several factors, including but not limited to, a drop in mortgage approvals and sellers being forced to settle below their asking prices,” Joshua Ellard, head of specialist finance and research at Finanze, said. “Affordability will continue to be a driving factor in the fall of residential property prices in the coming months.
“Reports from estate agents suggest that upwards of 50% of recent transactions have been below sellers’ asking prices. The shift to a buyer’s market is well under way, which is an entirely different narrative than the one we have experienced in recent times.”
The Finanze report, which reflects on 2022 and provides forecasts for the UK property market in 2023, also stated that rent rates will further increase as demand for accommodation from employees, students and young cohabiting couples with children will remain high.
“Some lenders have pulled out of the government guarantee scheme, which provides lenders with a government backed guarantee to issue mortgages to mainly first-time buyers with only a 5% deposit,” Ellard pointed out. “Higher stress test rates will mean many will need to save more for a deposit alongside battling high inflation.
“The increasing barriers to getting on the property ladder will force many to continue to rent. Fundamental economics tells us that when the demand for rentals outweighs supply, rental costs will only increase. Finanze is predicting a yearly increase in rents across the UK of 12.91% in 2023.”
Ellard added that it is widely accepted among analysts that residential prices will fall in the coming year, however “the magnitude of the correction is up for debate.” Savills is anticipating a 10% drop, while reports from Bloomberg have warned of a potential 20% fall.
Ellard added that 2023 will be a crucial year for the London housing market as the capital has seen a substantial reduction in foreign investment over recent years.
“MSCI data shows foreign transactions accounted for just 57% of investment in the London area for 2021, compared to 65% in 2015,” he noted. “Due to the recently imposed sanctions on Russian investment, I would expect that figure to have further declined in 2022.
“An optimist would view the weakened value of the pound and falling prices as a catalyst in stimulating further foreign investment. Our estimates predict a yearly price decrease of 10.98% across the UK.”
