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Property prices in the UK- winter 2022/2023

ceny nieruchomości w UK

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Today’s article is rather an overview – instead of explaining more, we’ll cover the topic of prices in the UK property market. Of course, this information will be of most use to those who are planning to buy or sell a house in the UK, but I think it will also be interesting to read for those who have no desire to move anywhere 🙂

Property prices in the UK- winter 2022/2023
What will property prices be like in the UK? What’s happening in the market?

How do we know what current property prices are?

Let’s start with some basic facts. First of all, property prices are dynamic – buyers adjust to a volatile market on an ongoing basis, while negotiations between the parties to the transaction are possible at the purchase stage. We are currently experiencing quite high inflation, which is also significantly affecting our industry. The best evidence of this is the UK House Price Index, calculated by the Land Registry. According to the December report, the average house price in the UK was £294,329, up 9.8% on December 2021 and, interestingly, down 0.4% on November 2022. Where else can we source data from?

For more local analysis, we can use ad portals like Rightmove and Zoopla. Not only will you find tools and reports on the locations you are interested in on these sites, it is worth simply analysing the database of current listings – always a sure indicator of the market situation. While we are on the subject of offers, it is worth mentioning our article explaining how to increase the value of a property when selling. At the bottom of the post, you will find more information about online valuation tools.

You can also ask your estate agent and mortgage broker about current property prices, although it is fair to say that no one will give you a very precise answer. Such statistics are usually public and an analysis of our recent transactions may not be the most accurate, after all we are operating on a small scale for the market as a whole. Of course, any broker will tell you that property prices have clearly increased over the last year, but giving specific figures will already be quite difficult.

Is the growth trend reversing?

In the previous paragraph I mentioned that property prices in December fell by 0.4% relative to the previous month. Does this mean that a crash is about to happen and houses can be bought at a fraction of the price? No, although further subtle falls are possible. According to the latest statistics, inflation in the UK is finally easing and therefore sellers’ expectations are also changing. However, I would be very cautious about saying that property prices will fall significantly. After all, it’s important to remember that even if inflation were to fall to 0% now, we won’t be paying as much for products as we will in, say, 2019. Simply put, property prices will not rise further, but they will not fall sharply.

It is also important to remember that property prices in the UK are heavily influenced by various assistance schemes. Not long ago, we wrote about the end of the Help to Buy scheme, which was hugely popular among our clients. The absence of HTB has certainly caused some potential buyers to abandon their plans to own their own home for some time.

To summarise: property prices may fall a little, but I personally do not foresee drastic falls. Of course, this is just my opinion and literally anything can happen in the market.

And what has been happening in the UK property market over the past years and months?

Property prices expressed in pounds are now at a record high. The last year with a comparable rate of increase was 2003, while the current surge has actually been going on since 2009! In the chart below, of course, you can see the full breakdowns and moments of higher growth. It is worth noting that a temporary reduction in Stamp Duty was responsible for the marked increase in transactions in mid-2021 – simply that buyers were keen to complete their purchase as quickly as possible to save on tax.

Property prices in the UK- chart
UK property prices between 2000 and 2023

There has been a very interesting development in terms of the number of transactions. According to HMRC data, the start of the pandemic marked a huge stagnation in the property market, which then resulted in a marked rebound in mid-2021. After the turbulence, we see only gentle increases from January 2022 onwards. In December last year, 108,960 properties sold. This compares to 102,270 in December 2019.

Property prices in the UK- transaction count
Monthly transaction volumes for 2019-2022

Nor can we forget the policies of the banks, including the Bank of England. Last year was marked by continuous interest rate rises. The first one took place on 17 December 2021 and at that time, it meant an increase in the base interest rate from 0.1% to 0.25%. Today, i.e. on 21 February 2023, the benchmark interest rate is already at 4%, and there are many indications that further increases await in March. Property prices largely depend on the decisions of the banks; after all, a large proportion of us are unable to buy a house or flat with our own savings, so a mortgage is needed. We are now seeing that bank offers are becoming a little more favourable than just a few weeks ago, so we can expect further turbulence in the property market.

UK property prices expressed in various indices

In addition to the official UK House Price Index, there are several other equally useful indices. Certainly the reports provided by Rightmove are a good tool, but it is important to remember that they are based on offer prices, not transaction prices. Nationwide and Halifax also publish monthly summaries, but these are based on mortgage lending amounts.

IndexMonth-on-month changeYear-on-year change
Rightmove (January 2023)0,9%6,3%
Nationwide (January 2023)-0.6%1,1%
Halifax (January 2022)0.0%1,9%
Changes in UK house prices across several indices

Where do the differences come from? One of the conclusions we can draw from the table above is that sellers are more willing to negotiate, after all, offer prices have increased while tansaction prices have not. The differences between Halifax and Nationwide could be due to differences in their offers, for example.

Is the property market slowing down?

Some of the data and the general economic situation in the UK suggest so, but let’s not forget that there is a relatively small supply of properties for sale in the UK with high demand. This fact means that properties put up for sale, despite high prices, always find buyers.

Propertymark, the estate agency organisation, reported that agencies had an average of 30 properties for sale in January. This is more than half the pre-pandemic average of 51. Source: Propertymark – Housing Report July 2022.

What will happen with property prices in the rest of 2023?

Experts predict that property prices will slowly fall over the next few months, with the high cost of living causing the number of transactions to decrease. Of course, each analyst firm gives different forecasts, but on average, declines of 6% over the year are predicted.

It is worth keeping in mind, however, that forecasts can be wrong – as recently as six months ago, it was assumed that annual price growth would reach 5%, when in fact it was reported to be almost double that. Source: Rightmove forecasts house prices to rise nationally by 5% in 2022, and by 3% in London. Interestingly, Zoopla predicted even smaller increases, at 3%. Source: Zoopla – Housing Market in 2022.

Is now a good time to buy property in the UK?

This question comes up really often, which is hardly surprising. No one will give you a definitive answer to this question, but it is worthwhile for you to consider a few particularly relevant facts:

1. Mortgages with low deposits are still available

In the Q&A we wrote that you only need a 5% deposit to get a mortgage. While this is certainly a large amount, especially for young people, raising several thousand pounds is realistic for many of us, especially on a yearly basis. Of course, the terms of a loan with an LTV of 95% will not be very attractive, but after a few years you can do a remortgage, moving to a potentially lower interest rate.

2. Stamp Duty Land Tax cut is coming up

A package of changes to Stamp Duty Land Tax in England and Northern Ireland was officially announced in September. Of particular interest is the change to the first tax threshold – from £125,000 to £250,000. This is an opportunity to save a really large amount.

3. Interest rates are likely to rise further

There are claims in the media that we are facing a minimum of one interest rate rise. If the predictions are true, taking out a fixed rate loan on existing terms may be worthwhile, but if you are late, you will be paying a bit more.

4. House prices unlikely to fall markedly

There is little evidence of a marked slump in the property market. Just a few months ago, there were many reports of an impending recession or even crisis, whereas now there is only talk of an economic slowdown. Yes, the economic situation is not the best, but it can hardly be said to be really bad, so we do not expect drastic changes.

5. Rents will also increase

If you are renting a house or flat at the moment, you have to reckon with the risk of rent increases. It’s not just property prices that have gone up – groceries, cars or holidays have become more expensive, and land lords are aware of this. You may find that the difference between your mortgage instalment and your monthly rental payment is not at all as great as you expect.

Regardless of whether property prices fall or not, if you are thinking of buying, we sincerely invite you to a consultation. Our mortgage advisors will not only check your current creditworthiness and select the right product for your needs, but will also answer any questions you may have. And if you found this post interesting, why not share it with your friends or sign up to our newsletter to be informed of our new articles?

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Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services and some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts
secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services are not regulated by the Financial Conduct Authority.

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