What’s in store for the 2023 UK Housing Market?
The end of 2023 is in sight and property analysts are now starting to scrutinise the UK property market prospects for 2023, however, with Brexit still looming over our heads like the “sword of Damocles”, it’s extremely hard to forecast with any degree of accuracy.
Depending on which newspaper you read, it’s either going to be an imminent doomsday scenario or an opportunity to forge new closer relationships with the international community. The market is resilient, and we’ve seen over last ten years the property market has seen a significant recovery since the financial crash of 2008.
The pertinent question to ask is what does 2023 have in store for the UK property market?
London House Prices Falling?
Over the last month or so there has been unsubstantiated reports that more London homeowners are putting their homes on the market and capitalising on their “London premium” and leveraging their capital to buy better value properties across Northern England. When you factor in that that property prices in London have more than tripled over the last 10 years, perhaps it makes sense to look towards other areas of the UK which have underperformed?
Recent forecasts predicted that house prices in London were set to drop by 1.7% but will this figure prove reliable? The same poll has also predicted further falls of 0.3% for 2019 but a 1.5% increase in London house prices in 2020. The problem is so called property experts have repeatedly talked down the London market only for savvy investors to move straight back in at the slightest sign of weakness.
Whilst it would be unwise to suggest that Brexit has not created unique challenges for the London property market, there is still strong domestic and foreign support for the market. More importantly property prices have not declined anywhere near the doomsday scenarios released on a regular basis since the referendum of 2016.
Sellers are winning the battle
If you look back over the last 24 months, following the Brexit referendum, we have seen negative forecasts repeated on autopilot. Experts have been talking down the economy and the property market however, this had any real impact on prices.
If you take London out of the equation, you might have not realised that while growth in property prices has slowed across the UK, prices are actually still increasing. We know that sellers are showing no signs of panic selling, no signs of reducing their asking prices and buyers have been forced onto the side-lines. Some data is demonstrating that many sellers have decided to withdraw their property listings and are more than happy to shelve plans to move.
Experts believe there is a close to 40,000 new build shortage each year in the UK and demand for social housing is still increasing at an exponential rate. This pent-up demand means any new properties immediatelyattract buyers.
It is also worth noting that immigration into the UK will continue in relatively large numbers despite the forthcoming withdrawal of free movement for EU citizens. The idea that the UK will be a closed shop is more fearmongering and it’s more likely that the current non-EU immigration system will simply be adopted across the board.
Financial crisis, what financial crisis?
Since the UK government and the Mark Carney of the Bank Of England issued a raft of economic forecasts under various Brexit scenarios, there has been reports that this potential financial crisis would outdo all previous financial crashes and cripple the economy.
However all is not lost, let’s not forget some of the fundamental changes introduced after the last financial crisis of 2008 to safeguard the economy/housing market
Which include:
- Increased mortgage deposits
- Withdrawal of 100% mortgages
- More cautious approach to mortgage finance
- Historically low interest rates boosting cheap mortgages
- Constant stress testing of banking sector finances
The idea that, for example, a no deal Brexit would lead to an economic crash in the region of 10% is unlikely. I appreciate UK interest rates have begun to tick higher from their historic lows but the BOE has stated they will remain static in the short term until Brexit is completed.
And whilst there is some chatter that we could see interest rates tick lower if there wassignificant hit to the UK economy in the short to medium term. So, stronger banking sector balance sheets, risk averse mortgage regulations, historically low interest rates and burgeoning demand for private rental properties will be more than enough to support the market in the short to medium term.