2023 Housing Market Forecast: Stand-Offs and Price Declines Expected

A housing market slowdown is expected in 2023, but prices are expected to remain higher than before the coronavirus pandemic started, according to experts.

Some new year stand-offs may also be seen between buyers and sellers as the market adjusts. This may mean that homes take longer to sell, and sellers may need to be more patient.

Halifax has predicted that UK house prices will fall by 8% in the year ahead. Although this would mean a significant drop in prices, it would not be enough to erase all the gains made in recent years.

According to Halifax, the average house price is expected to increase by 23% between March 2020 and August 2022. This would represent an increase of nearly £55,000 in cash terms.

To put the predicted 8% fall in house prices into perspective, the bank's homes director Andrew Asaam said: "Such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic."

The housing market is facing a number of challenges, including rising living costs and expectations of increased unemployment. This could make it difficult for people to afford their mortgage payments and could lead to more people losing their homes.

However, a lack of homes for buyers to choose from is expected to continue to support house prices.

Nationwide Building Society is predicting that house prices could fall by around 5% in the next year. This is a slight decrease from their previous forecast, which predicted a drop of up to 10%.

UK Finance has predicted that the number of house sales in 2023 will fall to around one million, down from 1.2 million in 2022.

Richard Donnell, executive director at Zoopla, said that, despite the "shock" of mortgage rates jumping in autumn 2022, banks are well-capitalised and ready to lend.

Zoopla believes that sales will be bolstered by buyers who are seeking extra space to work from home, an ongoing increase in people retiring, and - with high energy costs - some people relocating to homes that may be more economical to maintain than their current residences.

Mr. Donnell said that 2023 may not be as bad as some people have been predicting. He noted that when mortgage rates looked worse, people were more pessimistic about the future.

According to Rightmove, the average asking price for new properties coming to market is expected to be 2% lower by the end of 2023.

Its property expert Tim Bannister said that although the wider economic climate has stabilized somewhat heading into Christmas, there is no getting away from the fact that pressures on personal finances and mortgage rates stabilizing at a higher rate will impact overall affordability in the market in 2023.

We believe that this will lead to a 2% decrease in new asking prices in the UK market.

This would only take average asking prices for new properties coming to market back towards where they were in February (2022).

Mr Bannister said that differences between "hyper-local" housing markets may become more pronounced in areas where one side of a city, town or even street is more desirable or affordable than the other.

He added that there may be a stand-off on price between buyers and sellers, particularly in the early months of the year, as the tone is set for the year ahead.

As affordability becomes increasingly stretched for buyers, they may try to negotiate harder for the home they want. However, sellers may not be as quick to meet their expectations, feeling like they can hold out for the price they want – especially if there isn't much competition from other sellers in the area.

Mr Bannister said that the market is heading towards a better balance between supply and demand, but that they don't expect a surge in forced sales, which could cause a glut of properties and contribute to more significant price falls in 2023.

The market is likely to see less urgency from buyers as they wait for the right home to become available, leading to homes taking longer to sell. This could return the market to a more normal timeframe of around 60 days to find a buyer.

According to Frances McDonald, Savills residential research analyst, the pandemic has permanently changed the way UK buyers think about their homes. "The legacy of the pandemic - where buyers were driven by lifestyle choices and the birth of the 'race for space' phenomenon - is now permanently ingrained in the UK buyer's psyche and expected to continue to shape choices in 2023."

Savills noted that there may be opportunities for certain home buyers who don't have to rely as heavily on borrowing money.

First-time buyers who rely on mortgage finance and mortgaged buy-to-let investors are more likely to find themselves less able to buy until affordability improves, according to Savills.

Jackson-Stops estate agency has predicted that long transaction times will continue to act as a drag on the property market in 2023. They say that cash buyers who can move quickly will be the preferred type of buyer in this climate.

Nick Leeming, chairman of Jackson-Stops, said that house values next year will be more dependent on factors like location and finishes than on overall demand.

As a seller, it's important to be aware of the increased choice that buyers have, which can make negotiations more difficult. In order to get the best price, you need to be aware of the competition and be able to offer a competitive product.

Dawn Carritt, consultant to Jackson-Stops Country Houses, said that perfect interiors are becoming more important than a bad exterior in a market where people are working and entertaining at home more.