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Anticipating 2023: Projections for Housing Prices – What to Expect?

Are you ready for house prices to dip?

Industry analysts predict a fall in house prices in 2023 after a 24% increase over the past 32 months. Learn what this means for your next property purchase.

The Property Price Consensus

A general consensus among 13 sources surveyed is that UK house prices will likely decrease in 2023. The forecasted price drops range from 5% to 8% (with an average of 6%) across the market.

However, it’s important to note that this decline is often just a correction to the significant increases seen over the past two years. Asaam, Halifax Home’s director, highlights some of the most crucial house price increases the market saw between March 2020 and August 2022. The average house price increased by almost £55,000 (23%), reaching a record high of £293,992.

Despite the projected fall in house prices, Robert Gardner, Nationwide’s Chief Economist, suggests a good chance of a soft landing in the property market. He believes the risks are skewed to the downside, but it’s still possible to achieve a relatively soft landing next year with activity stabilising modestly below pre-pandemic levels. House prices may also gradually decrease by around 5%.

It’s worth noting that the UK is not one homogenous housing market when predicting house price changes. Instead, it comprises countless smaller regional markets, each with its dynamic influencing its performance. Savills, for example, expects the most severe falls in house prices for 2023 to be in London and the South East, with a decrease of between 11 and 12.5%. In contrast, Savills forecasts that house prices in the North West, North East, Yorkshire and the Humber regions will only decrease by 8.5%.

Savills also believes that the Prime housing market, or the top end, may be more resistant to falling prices. Central London houses are projected to fall by only 2%.

Factors Affecting Prices

The decline in house prices may be due to various factors, which have worsened due to the pandemic. The pandemic has led to a rise in inflation, which has compelled the Bank of England to raise the Bank Rate from its historically low levels. Additionally, household costs, such as energy bills, are likely to increase, putting a strain on family budgets. These financial pressures, higher mortgage rates, and the cost-of-living crisis will likely result in fewer first-time buyers and buy-to-let investors. This will reduce the demand side of the equation, leading to lower house prices.

The outlook for property transactions in the year ahead

The number of home sales is an essential indicator of the UK’s housing market’s health. Savills has predicted that the number of home sales, which was 1.1 million in 2022, will remain at least 900,000 in 2023. However, there is some positive news: December’s Rightmove data showed an 11% increase in the number of views for homes for sale compared to the previous year.

Will House Prices Bounce Back in 2024?

The outlook for house prices in 2024 is uncertain and depends mainly on the severity of the decline in 2023. Savills predicted a significant recovery in all regions between 2024 and 2027. However, the OBR suggests that house prices will continue to fall in 2024, with a combined decrease of 9% over two years. Similarly, Knight Frank forecasts that house prices will decline by another 5% in 2024 before starting to pick up again in 2025 and rebounding more significantly in 2026.

In summary, it is hard to predict the state of the British property market in 2024. While the house price downturn starting in 2023 might worry some, it is essential to remember that many factors are in play, and such corrections are not uncommon.

Also, Please do download your latest Landlord Saver Pack for 2023/4 which includes all the latest forms and notices you will need.

TENANCY AGREEMENT
SECTION 21 NOTICE
RENEWAL OF TENANCY AGREEMENT
SECTION 8 NOTICE
LODGER AGREEMENT
COMPLETE LANDLORD PACK
PROPERTY INVENTORY
COMPANY LET AGREEMENT

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“The end of ‘no-fault’ evictions” – what does it mean?

The Queen’s Speech on 11 May 2022 stated that the much-awaited Renters Reform Bill will be introduced during the next parliamentary session. This Bill is expected to bring about a significant change in the relationship between tenants and landlords by getting rid of Section 21 evictions.

The proposed amendment to the Housing Act 1988 will provide much-needed security for private tenants and tenants of Registered Providers across the country. Under the current system, tenants can be evicted for merely challenging unfair practices by their landlords, which has been a major issue in the private sector for a long time.

To ensure that landlords’ possession rights are not unprotected, the Bill will also seek to reform and strengthen those rights, especially in cases of severe antisocial behaviour. Landlords have long relied on Section 21 as a ‘no-fault’ eviction tool to ensure that properties can be returned where necessary, and the Bill will address their concerns.

The abolition of Section 21 means that landlords are no longer guaranteed a possession order and must instead provide evidence of specific grounds for seeking possession, as outlined in Section 8 of the HA 1988. Furthermore, discretionary grounds for possession can be subject to additional proportionality requirements, and the Court could give a tenant one last chance using a suspended possession order.

The impact of the Renters Reform Bill on the tenant/landlord relationship is yet to be seen, but the changes outlined in the Bill will provide a much-needed shift in the balance of power.

The repeal of Section 21 has been a topic of much debate, as it will significantly affect how landlords approach tenancy agreements. Landlords are understandably concerned about the repeal’s impact on their tenancies.

The repeal of Section 21 means that landlords can no longer pursue no-fault possession proceedings when seeking to end a tenancy. Instead, they will have to use Section 8, which comes with challenges – including the additional time, costs, and evidential burden in seeking possession.

In response, the government has promised to strengthen the existing Section 8 grounds for possession, including introducing more substantial grounds for repeated rent arrears and reducing antisocial behaviour notice periods. This is a welcome move, as the current cost of living crisis has made it increasingly difficult for landlords to manage rent arrears.

The government has also promised to make the court process for Section 8 proceedings more efficient and quicker for landlords. However, this will depend on the courts’ funding level, as they are currently facing an ever-increasing backlog.

Proposals are being put forward for circumstances where no-fault possession could be retained. For example, the National Housing Federation has suggested that registered providers should be able to pursue no-fault possession of supported housing and temporary accommodation. This would ensure that landlords are not discouraged from providing these services due to the higher risk of repealing Section 21.

Ultimately, the repeal of Section 21 will have a significant impact on landlords. While the government has promised to make the court process more efficient, landlords will still need to be aware of the additional costs and evidential burden associated with Section 8 proceedings.

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