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Five trends for 2023

1. First-Time Buyers Feel the Squeeze

Higher mortgage rates, the cost of living squeeze and the end of Help to Buy will frustrate the plans of those who want to climb onto the ladder. First-time buyers accounted for a record 26% of sales in 2022, but their numbers declined as the year ended.

In 2023, they may represent 20% of deals. It’s now £522-a-month cheaper to rent than repay a 90% LTV mortgage on a similar home. As a result more would-be buyers will be renting for longer as they add to their deposit.

2. Downsizers Get Moving

As many as nine million households in England - that’s 54% of the total – own their home outright without a mortgage. Despite the advantages this confers, these homeowners tend to move much less frequently, accounting for 29% of sales in 2021 and 31% in 2022.

This year, however, they will be playing a more active role in the market. Many are likely to seek to downsize in response to the soaring cost of running larger homes.

3. The Stars Align for Prime Central London

House prices rose strongly in most regions in 2021 and 2022. But Prime Central London languished. This year, however, these expensive neighbourhoods are poised for revival, with the wealthy international crowd eager to make the most of sterling’s relative weakness. The members of this buyer demographic tend not to need to borrow - which means they are less concerned about upward moves in interest rates.

4. A Challenging Era for  Landlords

Tougher regulation and rising costs are eating into buy-to-let profi ts. Landlords who own outright or bought some years ago can rely on an equity buff er, but some more recent buyers will struggle to make the sums add up. Some landlords will take a long-term view, but others are likely to sell up. That said, watch out for equity rich investors seeking to exploit the opportunities provided by the weakness in house prices and rising rents. They will increasingly buy through limited companies as rising rates make ownership in personal names increasingly unviable.

5. The Return to the Bright Lights

During lockdowns, the number of homes outside the capital bought by a Londoner reached a 12-year high. But this trend began to recede in 2022 as workers trudged back to their offi ces. The return to London will continue this year, as the market moves to a new post-Covid normal. But higher interest rates mean that more buyers will seek out the capital’s more aff ordable areas. Migration to the shires will also carry on - albeit at a slower pace than in 2022.

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Market Insight Winter 2023

Market Insight Winter 2023
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