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2023: Expert Rental Market Predictions

This year has been another crazy year for the UK property market, following 2021’s pandemic property market boom. Property industry experts from across the sector have shared their thoughts on what’s to come in 2023.

House Prices Falling

This year has been another crazy year for the UK property market, following 2021’s pandemic property market boom. Property industry experts from across the sector have shared their thoughts on what’s to come in 2023.

No ‘Deep Freeze’

Marc von Grundherr, Director of London lettings and estate agent, Benham and Reeves, commented: “A further increase to interest rates will certainly spur a continued cooling in current property values but it’s extremely unlikely we will see the deep freeze that many may lead us to believe. “At most, we can expect a five percent drop during the first six months of the year, at which point stability will return and house prices will start to level out. “As for the rental market, we’ve seen values climb consistently higher over the last year and with a shortage of stock continuing to be a burning issue, we can expect the cost of renting to climb by a further 10 percent in 2023.” While the focus is often on house prices, one expert said it is the transactions these prices are agreed on that fuel the furnace of the UK property market.

Government Remain “Intent On Attacking Landlords”..

James Forrester, Managing Director of Birmingham estate and lettings agent, Barrows and Forrester, said: “In 2021, we saw huge peaks of up to 165,000 homes sold per month and while this has subsided in 2022, we’ve seen a far more settled, consistent levels of homes sold on a monthly basis, between 60,000 to 75,000 per month.” The property expert expects this consistency to remain in 2023, and a return to “normality” is currently unfolding with respect to house prices. James added: “While buyers and sellers continue to transact, it’s probably a little premature to predict the final days of the UK property market. We also expect rental values to remain robust, climbing by between five to eight percent. “2022 brought further proof that the Government remains intent on attacking the nation’s landlords, with changes to capital gains tax threshold.”

Values To Decline, But Not Plummet

While there is no need to prepare for a house price crash, one expert said the UK can “confidently expect” property values to “decline” slightly over the next year. Managing Director of House Buyer Bureau, Chris Hodgkinson, said he has already started to see a weakening of the market due to combined factors including high inflation and lower wage growth. Rising interest rates have also put massive pressure on household budgets. The expert explained: “As a result, those entering the market to sell will still be able to find a buyer due to the shortage of stock available. “But while this continued imbalance between supply and demand will allow them to sell, they will no longer hold the power where negotiations are concerned and will find the hefty premiums secured during the pandemic market boom are no longer on the table.”

Downsizing Is The Lucrative Option

According to another property expert, the sellers in the best position are those wanting to downsize and move to a smaller home. This is because the number of mid-range stock coming to the market will free up a lot of quality stock at the top end of the market which has been “locked up for decades”. COO of GetAgent.co.uk, Mal McCallion, noted: “It means that there are going to be some incredibly rare bargains out there for those willing and able to move to their perfect home. “2023 is going to be a year of rationalisation – rational decisions being made in a rational market by rational participants who understand the market and their circumstances within it.” One property expert said the “one negative” for 2023 is the potential for property prices to fall due to the raised interest rate environment which started this year.

More Interest Rate Rises?

Jonathan Samuels, CEO of specialist property lending experts, Octane Capital, commented: “That said, this is likely to be spread unevenly through the country. “Areas where yields are higher, typically in northern areas of the nation, and property types with higher yields, such as HMOs, MUFBs, and ex-local authority, will be best placed to meet ICR tests and therefore resist downward pricing pressure. “At the opposite end of the scale, those areas that have wealthy cash buyers or low loan to value borrowers will also be better insulated from the impact of higher borrowing costs.”