In 2023, the housing market underwent dynamic shifts, influenced by economic fluctuations, regulatory changes, and the lingering effects of the pandemic. This UK housing market 2023 summary explores key trends, including price movements, demand-supply dynamics, and the impact of governmental policies, offering insights into the evolving landscape of real estate throughout the year.
- House prices sprang a new-year surprise to kick off 2023
- Tenant demand was high as we entered 2023
- Wealthy foreigners enjoyed the cooling property market and the weak pound
- Annual rent inflation reached 9.9%
- Nationwide's house price inflation turned negative for the first time since the pandemic
- Unfavourable offers deterred sellers in the market
- Bank rates reached a 15-year high
- Deposit-free mortgages returned for the first time since 2008
- London lead rent surges in Q2 2023
- Renters’ Reform Bill was tabled
- Halifax’s average house price inflation stooped to a 12-year low
- Mortgage rate surge threatened to kill off landlords
- Sellers cut asking prices to achieve sales
- Expensive UK homes deemed poor in quality
- Number of homes listed for sale hit 6-year high
- Bank of England suggested interest rates will remain at higher levels in 2024
Q1 UK Housing Market 2023
House prices sprang a new-year surprise to kick off 2023
As reported by Rightmove, house prices experienced a 0.9% increase in January 2023, marking the most significant new year bump since 2020. The average asking price reached £362,438, reflecting a £3,301 uptick from December 2022.
Nationwide reported the average house price in the UK as £258,297, while Halifax indicated that a typical property cost £281,684 in January.
Tenant demand was high as we entered 2023
A survey by Paragon revealed that 94% of landlords reported increased levels of tenant demand. In Q2 of 2020, only 12% of landlords reported high tenant demand. By Q4 of 2022, it had risen significantly to 90%.
Wealthy foreigners enjoyed the cooling property market and the weak pound
Foreign buyers made the most of the cooling property market and the weak pound and snapping up London homes.
According to a report by Hamptons, approximately 50% of homes sold in prime locations in Central London were bought by paying in cash without a mortgage. This represented an 8% increase compared to January 2022.
Despite the pound recovering from its record low, buyers who exchanged currency during the dip were able to reap the benefits.
Annual rent inflation reached 9.9%
In February, HomeLet reported that the average rent had reached £1,175, resulting in an annual rental inflation rate of 9.9%. The report also noted that excluding London, UK rent prices were 9% higher compared to 2022.
Concerning London, according to the property website Zoopla, rental demand in the capital in February had been 44% higher than the five-year average. In contrast, rental supply had decreased by 41%.
Nationwide’s house price inflation turned negative for the first time since the pandemic
In February 2023, the average UK house price dropped by 1.1% compared to 2022, settling at £258,297.
Interestingly, Halifax presented a contrasting perspective. It reported a 2.1% increase in the year to February, along with a month-to-month rise of 1.1%.
The discrepancy as always stemmed from the fact that each lender analyses different data sets, specifically the completed deals they oversee.
Unfavourable offers deterred sellers in the market
In February 2023, 35% of individuals who had put their homes up for sale removed them from the market without securing a buyer. This marked a rise from 24% in the previous year, 2022.
The percentage of properties withdrawn from the market peaked in January 2021 at 38%, and it continued to be higher than the rates observed in 2022.
Q2 UK Housing Market 2023
Bank rates reached a 15-year high
In May 2023, the Bank of England raised interest rates to 4.5%, marking the highest level in 15 years at that time. This move constituted the 12th consecutive rate hike by the Bank of England since 2021.
Brian Murphy, who served as the head of lending at the Mortgage Advice Bureau, commented, “There was hope that we had nearly reached the summit of the interest rate mountain and would shortly start our descent toward a lower cost of borrowing.”
However, the Bank of England had noted its intention to increase the rate once more to 4.75%. Additionally, it anticipated that inflation would decrease to 5% by the end of 2023.
Keep reading to know how this played out by the end of 2023.
Deposit-free mortgages returned for the first time since 2008
Skipton Building Society launched a 100% mortgage exclusive for renters above 21 years of age. This was a move to encourage and help put first-time buyers onto the property ladder.
If the buyer could prove on-time rent payments for the last 12 months and pass a credit and affordability test, they could have obtained a home loan without paying an upfront deposit.
In September, Skipton expanded this deal for individuals who have owned homes within the last three years, can demonstrate affordability for a mortgage, and boast a strong track record of rental payment history.
The deal: A fixed-rate product for five years, featuring an interest rate of 6.19%, offered over a maximum term of 35 years with no fees.
London lead rent surges in Q2 2023
In May 2023, the average rental price for newly let properties in Great Britain increased by 9.1% compared to the same month in 2022. London witnessed the largest yearly surge, with rents escalating by 13.1%, followed by Scotland (11.6%) and the North (9.2%).
This trend was attributed to the mounting mortgage expenses that Buy-To-Let landlords encountered, which they subsequently passed on to tenants.
Renters’ Reform Bill was tabled
In May 2023, the much-anticipated Renters’ Reform Bill was presented by the UK government. Termed a significant step towards addressing issues in the insecure private rental sector, the bill aimed to make it more challenging for landlords to evict tenants without a valid reason.
But there has been no significant progress, as a ban on no-fault evictions has been put on hold by the UK government without committing to a future timeline.
Why? Here’s what the government said:
“Implementation of the new system will not take place until we judge sufficient progress has been made to improve the courts. That means we will not proceed with the abolition of Section 21 until reforms to the justice system are in place.”
Halifax’s average house price inflation stooped to a 12-year low
According to Halifax, average property prices underwent a 2.6% year-on-year decline in June, marking the most significant annual decrease they had reported since 2011. The average house price was reported as £285,932, reflecting an £8,000 decrease from the peak observed in August 2022.
Q3 UK Housing Market 2023
Mortgage rate surge threatened to kill off landlords
Amidst unfavourable market conditions such as rate increases, tax hikes, and ever-increasing regulations, it was observed that landlords chose to sell their properties.
According to CBRE UK, Britain’s rental market lost approximately 127,000 properties since 2022. The continuation of this trend meant that the rental market would have lost 10% of its properties by the end of 2023.
Sellers cut asking prices to achieve sales
In an attempt to close deals, sellers turned to lowering their asking prices. Rightmove reported that asking prices experienced the highest rate of reduction in 12 years.
During the four weeks leading up to September 9, more than a third of homes saw price reductions, reaching the highest percentage since January 2011. On average, sellers who implemented price cuts decreased their initial prices by £22,700, representing a discount of 6.2%.
Q4 UK Housing Market 2023
Expensive UK homes deemed poor in quality
A report by the Home Builders Federation (HBF) indicated that while homes in the UK are expensive, their quality, including factors such as condition, age, and affordability, ranked relatively low.
Number of homes listed for sale hit 6-year high
In November 2023, Zoopla’s House Price Index revealed that the number of homes listed for sale on their platform reached a six-year high. Accordingly, an average estate agent now had 31 homes for sale.
For context: In January 2017, the figure was 24, while during the pandemic chaos, it was just 14.
Bank of England suggested interest rates will remain at higher levels in 2024
In August of 2023, the Bank of England (BoE) raised the bank rates for the 14th consecutive time to 5.25%. In September 2023, after 15 months, the BoE opted not to increase rates further.
The question arose: have we reached the peak?
Well, the rates were held at 5.25% as the year ended, with no signs of rates coming down.
In response to anticipated rate cuts beginning next year, the Bank of England expressed concern about the challenge of controlling persistent high inflation in the UK compared to other advanced nations.
The bank suggested that maintaining higher levels of interest rates might be necessary to achieve the government’s 2% inflation target, which dropped to 3.9% in November.
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