Date Published 03 January 2023
In recent times we have seen unprecedented growth in property both locally and across the country.
As we enter 2023, there has been a spike in the cost of mortgage borrowing which could cause the UK property market to return to levels seen only a few years ago.
The market has been overheated, with property prices seeing annual growth of more than 10% during the pandemic. But are property prices are now falling?
The average UK house price rose by £25,000 in the year to August, says the ONS
The average UK house price rose by £33,000 in the year to October, says the ONS
Why are UK house prices so high?
House prices are falling from their dizzying heights during the pandemic. However, they are still very high by historical standards and have been rising much, much faster than wages currently are.
The average price of a UK home has nearly trebled since the turn of the century. Prices have increased by more than 60% over the last ten years, according to Nationwide building society.
This is due to supply and demand: a shortage of housing stock and high demand for properties.
We have seen between 10-30 potential buyers for each home we have for sale, great news for sellers, no so if you are looking to purchase a property.
While this is certainly a factor, low interest rates had really been assisting the housing market since the onset of the COVID-19 pandemic. The ability to borrow money cheaply makes it easier for people to afford mortgages and to burrow more.
Since December 2021 the Bank of England has increased the base rate nine times from its record low of 0.1%. The base interest rate now sits at 3.5%.
It's thought that some first-time buyers will hold off as they wait to see what happens which could have an impact on the market, having said this, December 2022 we saw a rise in enquiries from first time buyers over previous December figures.
House prices grew by 2.8% in the year to December, falling from annual growth of 4.4%, according to Nationwide Building Society.
It also marks a 0.1% monthly decline in house prices, the fourth monthly fall in a row. House prices now average at £262,068.
In November Nationwide reported a 1.4% drop, which was the largest since June 2020, at the height of the Covid pandemic. In June 2020, we saw a huge demand for new homes to the market, this was helped by several Stamp Duty holidays given by the UK Government.
The most recent figures from Halifax, the UK's largest mortgage provider, showed a 2.3% fall in prices in November. This marks the third monthly dip in a row and the largest since the 2008 financial crisis.
The mortgage rate shift reflects a higher base rate of interest – currently at 3.5% – imposed by the Bank of England as part of its bid to tackle the surge in inflation mostly caused by the fallout from Russia's war in Ukraine.
However, it also pointed to factors supporting prices including the shortage of new homes, strong wage growth and cuts to stamp duty revealed in the government's mini-budget.
East Anglia was the strongest performing region in England, with average prices increasing by 6.6% compared to the same three months in 2021
Since the onset of the pandemic, prices of detached, family homes are growing much faster than flats.
Many workers are continuing to work from home a few days a week, so there is still demand for larger properties with space for a home office. While this hybrid model for working continues, so will the trend for larger properties.
In Billericay we are seeing an influx of buyers from East London and Thurrock with sellers moving east to Suffolk and Norfolk.
A recent study by Tyler Estates revealed that 45% of buyers during 2022 where looking in areas with a radius of over ten miles. It was felt that location was not as important as the size and price of the home required by buyers.
With working from home likely to be a more permanent part of many people's lives, demand for properties outside cities has jumped.
Will house prices crash in 2023?
While we can't say for sure what the future holds, recent rises in the UK base interest rate have sparked fears that the market might reduce.
While annual house price growth has so far remained high across the board, house prices are now falling slightly. If demand slows down and people have smaller deposits, the rate of house price growth could fall further.
But that's not to say property prices will crash as demand still tends to outstrip supply of homes in many areas across the UK. This is likely to cushion the blow, meaning house prices could fall rather than crash.
Given the continued race for space, many housing market predictions remain bullish. However, the perfect storm of high inflation and interest rates is set to dampen the housing market a little locally.
In November 2022, property website Zoopla said it expected prices to fall by 5% in 2023
In July 2022, property website Rightmove said it expected house price growth to slow to 7% for 2022 as a whole
At Tyler Estates, our predications are that we will see a price drop of around 5%-10% in the first six months of the year. With the cost of living, we will see many of the larger homes come to market as owners look to downsize and reduce costs, these will be purchased by buyers almost immune to the cost of living crisis looking to capitalise on a slightly cheaper home then a year ago. The second half of 2023 will likely see reductions in mortgage rates that will spark a end of year revival.
Locally, we have seen many large scale new housing developments agreed by the local council or approved after an appeal to the Planning Inspectorate. Whilst I do not think this will have a long term affect on property prices in Billericay, the short term upheaval whilst work is being carried out and the impact on the local services and infrastructure will be more costly.
If you would like to discuss your property needs please pop us a call on 01277 626181
