National estate agent Jackson-Stops has said it expects mainstream house prices to either maintain overall with a 0% change or see a minor adjustment in localised markets of between 0% and -4% in 2023.
It said this outlook will depend on how the broader economy performs but added that a soft landing was likely, underpinned by low housing supply, high levels of housing equity and a high proportion of fixed-rate mortgages.
The estate agent believes key areas for upsizing families, such as Mid-Sussex and Surrey, are expected to see a continuation of current house prices thanks to a prolonged period of low supply and pent-up demand, despite previous frenzied market levels now cooling off.
Jackson-Stops predicts that demand in the middle market from committed buyers who plan to resume their house move next year after a “wait and see” approach in response to recent mortgage rate uncertainty, will give the 2023 spring market some added momentum.
Furthermore, the national estate agency notes that the waterside and coastal market is likely to be relatively immune from economic headwinds, especially on the South and East coast with close links back to London. The overwhelming trend of lifestyle purchases is predicted to continue, driven by the swelling demographic of equity rich baby boomers looking to downsize.
The North of England, particularly Yorkshire, is another market set to be sheltered to some extent by a drop in house prices. One reason for this is that the North has not seen the same levels of house price inflation as properties in the South, making the fall feel more plateaued.
Lengthy transaction times caused in part by long chains, will continue to act as a drag on the market, making cash buyers who can make the move quickly the preferred buyer for 2023. Jackson-Stops said it’s no longer the higher price that wins the bid, but the buyer who can be the most flexible and progress the quickest.
It said there is an acceptance and willingness from sellers that moving into rented accommodation temporarily can be necessary in order to not lose a sale and also give the market time to readjust following an uncertain end to 2022. To help further negate transaction woes, communication remains critical, which is especially true in busy, high demand areas such as the Cotswold’s, Exeter and Weybridge.
Whilst demand may continue to outstrip supply in Q1 2023, fresh sellers are set to list their homes later in the year, said the estate agent, levelling out the previous imbalance between supply and demand which dominated the 2022 housing market.
Nick Leeming, chairman of Jackson-Stops, said: “While the market will remain subdued until the end of 2022, we expect continued, if sometimes selective demand over 2023, with a return to more normal transaction volumes.
“Across our network we expect to see greater levels of supply enter the market in spring 2023 as long-term mortgage rates begin to level out, giving both buyers and sellers more clarity. House values next year will feel much more dependent on the slightest variables, from the perfect location to pristine finishes, without the backdrop of unprecedented demand to wipe away any such compromises.
“For a seller to command the best price, they must now be aware of more choice than we’ve seen in the past 18 months, making a purchasing decision all the more discerning and negotiations likely.
“Recent interest rate rises and the announcement that changes to stamp duty thresholds will be reversed in 2025 could put first-time buyers and those looking to buy with smaller deposits on the backfoot in the short term. Yet, at the higher end of the market, where sellers will have more equity to buy with, broadly these buyers will remain insulated from mortgage rate rises and issues around affordability.
“Many lockdown legacies remain, in particular the race for space as flexible working is accepted as a permanent staple. This means buyers in 2023 are looking for family homes that are bigger, with an office room or garden large enough for a standalone studio. The flexibility to work from home has made buyers more open minded, both on location and property type.
“Whereas once it needed to be within walking distance of a station for the daily rat race, now to be within just a few miles drive of a major train station will often suffice, opening up a plethora of new properties in the process.
“For young professionals that may struggle to buy their first home in cities such as London or Bath, applying for jobs that only demand them to be in the office part-time opens up many more avenues of their property search; a real plus for the UK market more broadly.”
