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When will we see a rebound in House Prices?

There have been a lot of reports in the last few months foreshadowing the likelihood of a tension-stricken housing market for 2023. However, most predictions have already declared that the cost of housing is going to fall this year, with wary buyers and rising inflation.

But is there any good news on the horizon?

Here, we’re examining the future of the housing market and when we can expect to see these changes.

What changes do we hope to see, and when will we see them?

It is one thing for buyers to say they want a rise in the value of their properties, but ultimately, we need to know what conditions need to be met for this to happen. Still, to really understand what our data means, we have to appreciate how we’ve found ourselves in this current housing climate.

There are so many aspects to this that, of course, we couldn’t cover them all in one section, but we can go over a few standouts:

Mortgage Rates
Statistics show the mortgage interest rate has been rapidly increasing since 2022, with variable rates hitting 4.8% at the end of 2022. It hasn’t been easy for renters either. Private rental prices saw the highest rise since records began in 2016, reaching over 4% for the UK as a whole.

That said, while rates will remain high for 2023, they are declining - dropping by 0.3%. However, the BoE predicts a significant decline in base rates by the end of 2023 and leading into 2024. As this bank rate can influence mortgage interest, we may see further reductions in the years to come.

The Cost of Living crisis
This is a complex and ongoing political and societal issue. We must consider reasons such as the high price of goods and services, inflation, and wage stagnation - as these factors can explain a withdrawal from the buyer's market. For instance, in December of 2022, the House of Commons released a segment documenting that the consumer prices index (CPI) was 10% higher than in 2021.

Another significant change in the housing market in 2023 will be the demand for more sustainable and energy-efficient homes. As people become more aware of their housing choices' environmental impact, they will look for homes built with sustainable materials and featuring energy-saving technologies. This trend is expected to drive demand for homes equipped with solar panels, geothermal systems, and other green technologies.

Current forecasts suggest we’ll see these trends peak as we enter 2023. However, towards 2024, this is set to drop significantly, with CPI inflation stabilising by 2025.

Softening demand
With the aspects we’ve covered above, it should be no surprise that the current demand for properties has weakened. In addition, unemployment rates are likely to peak in 2023 at 4.6%. But passing 2026, we will see this gradually fall to 3.8 - 3.9%.

Takeaways

These predictions are optimistic. However, there are no guarantees with the housing market. House prices vary depending on various factors, including interest rates, unemployment rates, inflation rates, and local market conditions. However, based on the current market conditions and trends, it will likely take some time for a rebound to occur.

Higher purchase prices mean the rental sector will continue to expand with intense competition in certain regions for good quality rental properties.

To prepare for these changes and ensure you have the best information about pricing fluctuations, it's often a good idea to have an excellent foundation to work from. For instance, many agents are considering software for inventories, periodic and check-out reports.

Panos, 17 February 2023