What will 2023 bring? Here's what you need to know about the property market

House prices have gone through the roof recently, following 2021's property market boom. So, what's to come in 2023?

Based on last year, it would be hard to lay any big bets on what may happen in 2023 with any confidence, but the market seems to be showing a robust level of activity, albeit slowing ever so slightly. Below we share our expert thoughts on what could be the key topics this year...

Market forces

Rightmove forecasts that, depending on the type of property, asking prices will, on average, drop by 2% in 2023*. As this is a national average, housing market activity and house price changes will vary depending on where you are selling or buying. Overall, we can expect to see a more level market with fewer peaks and troughs.

For landlords, there are many considerations they will need to weigh up when it comes to continuing with buy-to-let and thinking about buying additional properties. On the one hand, letting a property has more challenges than ever, with the increased cost of living, rising mortgage costs and additional legislation to cope with.

However – demand from tenants for a place to rent continues to rise, fuelled in part by many first-time buyers putting plans on hold and opting to rent instead until the economic climate improves their personal circumstances. This demand is far from being met by the current supply of available rental property. Not only does this mean that letting a property is quicker than ever, but rental prices are being pushed upwards to record levels, currently averaging £1,174 across the UK^. The chance to generate a good yield is still there for landlords, if they invest in the right properties and locations.

If you are thinking of investing in buy-to-let, why not read our Guide to Investing.

Mortgage costs

Following the Liz Truss mini-Budget in September, the end of 2022 saw three increases to the Bank of England base rate which resulted in higher mortgage rates (and associated costs of borrowing). Currently the Bank of England base rate sits at 3.5%, and whilst some analysts are predicting further rate rises in 2023, the peak is anticipated to be lower than previous industry forecasts.** Anyone looking to remortgage this year may experience cost challenges still, however, there are signs of more stability in the mortgage market compared to 2022, with a wider range of mortgage products.*** However, base rate changes and lenders' reactions will need to be closely monitored when the Bank of England’s Monetary Policy Committee next meet on 2nd February 2023.

Lettings legislation

Although the rental reforms white paper was released last June and there has been the return of Michael Gove to Government, which may suggest some continuity with previous legislation plans for the private rented sector, it is still no clearer what the future for the progression of the reforms may be. The white paper covered areas such as the scrapping of no-fault evictions and the introduction of a Decent Homes Standard. But it may be unlikely that sweeping reforms will be brought in all at once and piecemeal changes may be the order of the day – but for now, we will just have to wait and see. It does seem very unlikely that any elements will be made law this year.

Another topic that will remain ‘hot’ for landlords this year will be the Minimum Energy Efficiency Standards (MEES) ‘pencilled’ for 2025. Currently, properties in the privately rented sector need to have a minimum energy performance rating of E but the Government is proposing that this is raised to a C rating. Although there is no confirmation of the change, it might be wise for landlords to factor in improvements. In the current environment, where energy efficiency is high on the political agenda, it would be a surprise if changes to standards were not to be introduced at some point. Whether you’re looking to move, buy or sell in 2023, the property market could provide you with various opportunities as it continues to show a consistent level of activity throughout.

Correct at time of publishing – 19/01/23