How Will The Housing Market Look In 2023?

Posted:4th January 2023

The last few months have been a little turbulent with the cost of living crisis, interest rates fluctuating, changes in Prime Ministers, financial budgets, and property prices skyrocketing.

With all this activity, it begs the question, what will the housing market look like in the coming months now we’re in 2023?

If you plan to buy or sell property in the near future, there are many factors that you will need to consider before doing so. Depending on your reasons for wanting to buy or sell, the current financial situation may influence your decision.

In this article, we will lay out some of the points you may wish to think about before deciding what to do.

Interest Rates

The sudden instability in interest rates was initially triggered by the government’s mini-budget in September which led to a lot of uncertainty in the market with tax cuts and borrowing plans.

Now since many of the original budget plans have been reversed by the new chancellor, the interest rates seem to have stabilised, but they are still a lot higher than they were earlier in 2022.

As an indicator, the average fixed-term mortgage in October 2022 was around 6.65% (for a 2-year fixed rate), whereas the average in November 2022 is around 6.49%. At the beginning of the year, the rates were as low as 1.5 and 2%. With variable-rate mortgages, the interest rates can fluctuate at any time depending on different factors.

For those wanting to re-mortgage or buy a house and get a new mortgage, it is a good idea to speak with a mortgage broker since rates are changing all the time and a lot of fixed-term mortgages have been discontinued by many lenders due to the sheer uncertainty of the market.

Property Prices

The Office of National Statistics (ONS) published statistics that say that the average UK house price increased by 15.5% over the past year up until July 2022. This was said to be the highest annual property price rise since 2003.

Whilst the property market has been booming in the UK over the last few years, the hike may be enough to put people off buying for now, especially when you couple this with the rise in interest rates and the cost of living.

Stamp Duty Holiday

In July 2020 the UK government introduced a stamp duty holiday. This meant that certain people would not need to pay stamp duty tax, or were required to pay a lower amount when purchasing a property.

On 23rd September 2022, another holiday was introduced as part of the mini-budget to try to activate activity in the housing market since the cost of living crisis and spike in inflation rates.

The stamp duty holiday rules include the following:

  • First-time buyers do not have to pay stamp duty on the first £425,000 of a property purchase price, this is an increase on the original £300,000 threshold.
  • Buyers will not need to pay stamp duty on properties of up to £250,000, an increase from the prior £125,000 mark.

For buyers, this is a good opportunity to avoid paying taxes, meaning more money to spend on home refurbishments for instance. This is beneficial for sellers too as it may suggest that buyers have more wiggle room when it comes to the sale price.

Cost of Living

The cost of living has gone up in the UK as a result of the war in Ukraine and the backlash from the pandemic, among many factors.

This means that fuel, gas, food, and general bills have increased. As the winter months are drawing closer, it is likely that people are unwilling to move house as the unpredictability of future bills and costs may deter them from veering away from the stability of what they know. Alternatively, people may look to downsize to lower their expenses.

For sellers, this is an important thing to think about when looking to put a house on the market. It is likely that the end of 2022 and the beginning of 2023 will be turbulent times for all. Moving house may be at the back of people’s minds.