Everyone remembers 2020 as a year of global induced by coronavirus but by mid-year, a few global real estate markets buoyed up amidst the crunch. Dubai, Miami and London real estate markets are the most notable ones. Overall, the UK housing market started showing recovery and booming signs right after re-opening, thanks to the fierce demand for bigger homes, more space, and better environment suitable to start working from home and also relax and recharge at the home.
Reforms introduced to keep UK property market afloat
In order to keep the UK property market a profitable economic segment and to grow its share, the UK government introduced several timely reforms such as stamp duty holiday and historical ultra-low interest rates. Resultantly, the numbers of potential investors and property buyers started rising sharply. Mortgage approvals were on the highest levels along with several other positives that convinced potential buyers to why invest in London and the rest of the UK.
Current scenario of UK real estate market
Interest rates are increasing but so is the demand for properties for sale in UK, therefore, expectations for 2023 tend to be positive. Properties for sale in London are expected to perform better than the rest of the regions in the country. To know the answer to what to expect from London real estate market in 2023?, click it to read.
Increasing interest rates
Fast forward to 2022 and 2023, the UK real estate market situation has dramatically changed mainly because the interest rates started increasing. The London property market will likely slow down as potential people will wait for interest rates to fall once more. According to an estimate, the Bank of England has raised interest rates nine times in 2022 and they are expected to revise it again any time soon.
Have house prices in UK dropped?
It is not wrong that property prices have gone through the roof but amidst the news of soaring inflation and rising interest rates, the prices of UK properties are falling. The UK housing market still shows a positive outlook and prices have also started climbing over the past year. However, in comparison to the other factors including the surge in mortgage rates and soaring inflation, the rate of property price growth is stalling in several local markets and even falling somewhere.
According to Halifax, house prices dropped 1.5% in December 2022, which is slower than the 2.3% fall reported in November. On the contrary, there is a steady increase in the average asking prices in January 2023.
Why are UK property prices so high?
The UK property market has been overheated, with property prices showing growth of more than 10%, during the pandemic. According to the data acquired from Rightmove, property prices fell by the end of 2022 but the asking prices started rising again in January 2023. Comparatively, the prices for properties for sale in UK are still very high by historical standards and have still been increasing faster than wages. According to Nationwide building society, prices for UK properties have increased by more than 60% over the last 10 years.
According to the latest data, the number of new properties for sale in UK has decreased by 28% over a year, while the demand for properties also decreased by 50% during the same period. It is also found that UK property prices got affected the most in rural areas, as compared to the highs experienced in pandemic’s duration, when people were moving away from urban areas.
Supply vs. Demand
Apparently, the long-term driver has all been about supply and demand for properties for sale in UK. It is a shortage of UK properties in the market and relatively higher demand. This factor certainly plays a crucial role; but low-interest rates have been driving the UK property market, especially, since the start of the pandemic. It is because the ability to obtain a loan at cheaper rates allow people to buy properties at affordable mortgage rates.
Now, when the mortgage rates are increased, it is becoming expensive to purchase properties for sale in UK. Resultantly, the UK property market has started to take a hit, with property prices falling constantly. It is also another possibility that first-time property buyers may hold off as they wait to see what 2023 will unfold, which could have an impact on the market.
Is 2023 the right year to buy a property in UK?
A large majority of the population in the UK is willing to invest in homes and properties for sale in the UK but buying is not always the right decision. Historically, it is seen that property ownership percentage rose in the country after the Right-to-Buy scheme was introduced in 1980, where council tenants were asked to buy their rental homes at a discounted rate. Now year after year, the prices of properties for sale in UK (despite falling during the pandemic) increased tremendously leaving people with little room to buy their own homes.
Moreover, inflation and the rising cost of living is likely to be major cause of the UK market slowdown. The household budget restraints make fewer people afford to stretch their budgets to buy properties for sale in UK. Therefore, the average age of first-time property buyers has also increased in recent years. Several estate agents in UK also suggest that before setting off on a property buying journey, you must ask yourself whether home buying is right for you or not.
We believe that investing in properties for sale in UK is a viable option and if you are interested to buy properties there, you must check this step by step guide of buying properties in UK.
The UK property market thriving positively
According to the Bank of England, the number of mortgage approvals for house purchases in UK fell to 46,100 in November from 57,900 in October. This is the lowest level since June 2020. Apparently, property prices started falling at the end of 2022, the UK property market defied all the odds by not just surviving but positively thriving. A few factors that helped the market stay afloat include:
- Pent-up demand for properties for sale in UK, as a significant amount of foreign capital has been pouring into the city.
- Desire for better and bigger living space at a prime location will continue to be preferred criteria, which will attract more foreign property buyers looking for a future-proof lifestyle.
- Increased employment opportunities will also affect the UK housing market, as newly employed people will prefer living in close vicinity of their jobs.
- Larger deposits make it more affordable for potential investors to buy properties in UK on mortgage, because the monthly payment amount will remain low. However, it is not a great option for first-time property buyers, who usually have small deposits or down payments.
What to expect from UK property market in 2023?
Property prices are decreasing and the trend is expected to continue this year as well. There are several reasons behind this such as:
- Inflation is increasing, making it more difficult to afford goods and services as they are becoming more expensive compared to a year’s ago values.
- Interest rates are increasing from their record lows during the pandemic, making it difficult to consider mortgage option to buy a property.
- The UK government announced a mini-budget in September 2023, where the Bank of England warned to increase the interest rates further to combat higher inflation.
- Several financial institutions have also withdrawn mortgage deals after the mini-budget, which reduced the availability of a variety of home loans.
Should I buy property in UK or hold off?
Buying a property in UK is a viable investment option but people with low deposits must be hoping for house prices to fall further to make it more affordable to buy. Relying on the decline of interest rates is not advisable because interest rates are expected to continue going up. When borrowing becomes expensive, buyer demand starts falling down but during this time, people with hefty savings tend to grab better deals.
However, it is also notable that you might save money on the asking price of a property in UK but rising mortgage payments (in terms of interest rates) could cancel out the savings. Another consideration would be the dramatic decline in house prices, giving buyers more options to stretch their budgets.
Remember, the UK property market remained resilient during the pandemic, so there are fewer chances that the market will completely come to a standstill. Therefore, buying a property in UK or holding off to wait for a further decline completely depends upon your circumstances so, you need to weigh up all these pros and cons carefully.
Call us now to register your interest
If you are still willing to invest in UK properties and have decided to get on the next rung of the property ownership ladder, you must pick the market experts to work with. HFRE is the right choice for you because we understand this market better than others and now all you can do is to contact our sales experts at +971 4876 2473 or write your query in detail at info@hfre.ae. We will not just suggest you properties according to your budget but will also educate you about the market trends so you will feel empowered to make the right investment decision.
