Outlook for the Property Market in 2023

Published by: Ricky Sodha

As we approach the end of 2022, this article considers the current trends in the property sectors in relation to recent and long-term events and puts in perspective the challenges faced by property investors and landlords.

House Prices - A Historic Perspective 

Against a backdrop of rising inflation and interest rates, a shortage of rental properties and the slowing housing market, the property sector is facing events not seen since the financial crisis of 2008. Looking further back, the current situation is similar to the recession in the early 1990s. Further back, following two oil crises, in the 1970s, there was a decade of wildly fluctuating interest rates, which went from 17% in 1979 down to 9% in 1982, and back to 14.9% in October 1989. Property investors have had to cope with the issue of high interest rates several times in the past fifty years.

On the flip side, the residential sector was only somewhat impacted by Brexit and the pandemic. In fact, prices and activity were boosted by the reduction in stamp duty from July 2021 until September 2022. Recent data shows that house prices increased by over 8% in the year to the end of November and, therefore, it is understandable that they will come under pressure in 2023.

At this stage, how much of a pull-back is unclear. According to this article in Moneyweek and research carried out by Zoopla, they are expected to fall by about 5% in 2023 although the Office for Budget Responsibility’s prediction is much weaker at 9%. No doubt there will be regional differences.

The Private Rented Sector

In the private rented sector, this year has seen a continuation of negative press. The media insist on focusing on rogue landlords who make up a minority of the property investors we support here at BTC. We do not condone landlords who treat their tenants unfairly. There is a need for balance in news reporting, but, unfortunately, good news doesn’t sell newspapers or get clicks on websites!

The Government is continuing to chip away at the profitability of the rental market, with reductions in the capital gains allowances, the implementation of tighter EPC regulations, and the abolition of Section 21 evictions. Keeping on top of the legislation and the regulations is one of the many areas we help our landlords with.

On a more positive note, there is strong demand for rental properties, particularly in London and the major cities across the UK. The UK’s limited housing stock and first-time buyers delaying property purchases underpin high rents.

Uncertainty brings Opportunity

In an uncertain world, there will be opportunities for investors who are prepared to take the long term view and take advantage of lower property prices. Those who do not require a mortgage will benefit from the greater pool of rental properties to purchase on the market at lower prices. They may have to ride out the upcoming recession to see capital gains, but in the meantime will benefit from higher rents. 

Ricky Sodha, BTC’s Managing Director says:

“With the upcoming changes to the market, it is vital that landlords bullet proof their income. One way of achieving this is through BTC’s guaranteed rent scheme.
There is no room anymore for the rogue landlord. The government is sending a strong message with the introduction of selective licensing and the lowering of the required EPC rating. 
Historically, we have seen many short-term dips and stagnation in the market. This gives nimble buyers to benefit from a property market which doubles every decade. . Opportunities arise during a recession and therefore, “cash is king” and, like Del boy said, “he who dares”!”

In conclusion:

The property sector, whether the building of new homes or the regeneration of the existing housing stock, is the foundation for turning a flagging economy around, providing thousands of jobs across many industry sectors. It is in the UK's best interest for the Government to support homeowners, tenants and investors.