In the bad times and the good, the main drivers of the UK property market are ‘the three D’s’: debt, death and divorce. But in 2023, there seems set to be a fourth ‘D’ – downsizing. More owners of large houses, under pressure from soaring energy and maintenance costs, may consider selling.
Mary Beeton, Head of Sales at Hamptons, says that more of those who were reluctant to relocate during the pandemic may be minded to move. She says: “We’ve already been talking to owners who, after many happy years and Christmases in their home, want to be celebrating Christmas 2023 in a smaller place.”
But bargain-hunting buyers sensing an opportunity may face disappointment. Beeton explains that demand for family houses remains above pre-pandemic levels. Moreover, those who have lived in a substantial property for several decades are rarely under financial pressure or desperate for any sort of offer on their home.
Beeton believes that this reflects a broader trend that should provide support to house prices, despite predictions from some commentators of a sharp decline.
Aneisha Beveridge, Hamptons Head of Research says: “The risks of price falls are undoubtedly greater than they were last September when we forecast that price growth would flatline by the end of 2023. Mortgage rates increased far more sharply than we expected, but since their October peak, rates have started to come back down to a more manageable level. While buyers reacted to this spike in October and November, sentiment seemed to settle in December with an uptick in what buyers were prepared to pay.”
Hamptons believe the recession, although painful, will be shallow. Prices should be underpinned by the stricter lending criteria and stress testing of mortgage applicants that came in after the global financial crisis.
Beeton adds that these affordability checks will limit a tide of forced sales that could trigger a slump. But sellers must be realistic, given that mortgage rates, although below their peak of late 2022, are still high.
Hamptons does expect that transactions will be lower in 2023. Yet deals will continue to be done, with more than 90% of those who sell still making a profit. The average 2022 seller in England and Wales sold their home for £108,000 more than they originally paid, with 94% making a gain. Beeton comments: “A good property in a good location at the right price will sell.”
She expects that some househunters who have been waiting on the sidelines may not hesitate further: “Some will want to get in before everyone else, ahead of an upturn in 2024. When assessing what they’re prepared to pay, buyers will make the calculation that they’re going to be in that home for a decade at least.”
One of the most watched areas in 2023 will be flats. As a result of the pandemic race for space, the price gap between flats and houses has widened: the average detached house is now worth twice the value of the average flat.
But this could be reversed, as downsizers seek a different lifestyle. First-time buyers who were dreaming of a small house may opt for a flat instead, because of the surge in interest rates. The average mortgage repayments made by a first-time buyer with a 10% deposit have risen by 65% since January 2022.
However, the difficulty of raising any size of deposit means that 2023 seems unlikely to be a year when more members of Generation Rent join Generation Buy.
Beveridge sums up the outlook: “It’s our forecast that 2023 will be a year of transition, before the market finds its new normal in 2024.”
Hamptons – The Home Experts
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