Jackson-Stops’ gives their 2023 property market predictions

Jackson-Stops’ gives their 2023 property market predictions: “prime country homes are not in a ‘cappuccino market’.”

Headlines:

• • National estate agent Jackson-Stops predicts that house prices will see a minor adjustment only of between 0% and -4% in 2023, before returning to growth again in 2024
  • Soft landing predicted despite recession, underpinned by low housing supply, high levels of housing equity and a high proportion of fixed-rate mortgages
  • Lettings market to outpace sales, with predicted growth of between 2% and 5% for private rents
  • Coastal market most immune from economic headwinds
  • EV charging points, ground source heat pumps and increased space remain top of buyer wish lists

National outlook

National estate agent Jackson-Stops expects UK 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. This outlook will depend on how the broader economy performs with a soft landing likely, underpinned by low housing supply, high levels of housing equity and a high proportion of fixed-rate mortgages.

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. It’s no longer the higher price that wins the bid, but the buyer who can be the most flexible and progress the quickest. 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, levelling out the previous imbalance between supply and demand which dominated the 2022 housing market.

Nick Leeming, Chairman of Jackson-Stops, comments:

“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.”

Country house market

A reassessment of property requirements will continue to influence the country house market throughout 2023, with faultless, best in class properties most likely to maintain their value. Those homeworkers who remain unaffected by the reopening of their offices, who have settled well into their first move out of the capital, will now have the confidence to carve out deeper roots in the countryside. These factors, coupled with a desire for more space, will ensure the rural homes renaissance continues throughout 2023.

Energy efficiency will become an even greater priority for buyers next year, with many house hunters opting for homes with EV charging points, upgraded insulation and ground source heat pumps, to offset rising running costs. Homes with planning permission already in place will continue to command a premium, with the potential to save months of time by allowing buyers to do a ‘double jump’ purchase. As the cost of moving home rises, 2023 will continue to see many buyers look to future-proof their next move and buy a property with the opportunity to extend or convert in order to cater for possible lifestyles changes in the future.

Dawn Carritt, Consultant to Jackson-Stops Country Houses, comments:

“While a slight readjustment in the market shouldn’t be unexpected, seeing house prices fall in the region of -2% to -4%, dependent on location, there remains many positives for buyers and sellers despite market uncertainties in the latter part of 2022.

“We’re not in a ‘cappuccino market’; all froth on top and funded by borrowing. This is particularly true for the current country house market, where cash purchases are much more commonplace than ever before, in turn creating a much smaller proportion of risk in the borrowing market.

Around 36% of UK properties are currently owned outright, often those who have been lucky enough to capitalise on the house price boom over the past decade and build substantial equity in their homes. This figure has increased by 21% since 2012 and continues to increase each year.

“It’s understandable then, that unlike baby boomers, many first-time buyers who have never experienced a high interest rate environment before are delaying their move in the short term as they struggling to find an affordable mortgage option. However, in the long-term, the outlook is much more positive as house prices and rates both stabilise, leaving the market in a much stronger position now than it was in the 1990s or early 2000s.

“The prettiest home on the street will always sell fastest in a competitive market and can command a premium as a result. Buyers always want to be the best and have the best, and a bad exterior can be hard to improve, but perfect interiors are fast becoming the more important asset in a market of home working and home entertaining, especially as renovations are becoming more costly and drawn out than ever before.”

Tim Hayward, Director of Jackson-Stops Burnham Market, comments:

“Sensible pricing is imperative from sellers in 2023. Overly optimistic values will be at a higher risk of future price reductions that can taint a listing.

“This price adjustment will not be significant, however, but needed to ensure a competitive amount of interest from day one. It’s also likely that some of the country’s hotspots like the Norfolk coast, where demand still far outstrips supply, will be late to the party for this market correction.

“For our buyers, the property itself remains the most important factor when it comes to making a purchase, while energy efficient features are a nice to have, the old adage of location, location, location could not be more true.”

Toby Whittome, Director at Jackson-Stops Mid-Sussex, comments:

“An immense amount of pent-up demand, that has only been partly satisfied, remains in the Mid-Sussex market, with an enormous amount of buyer interest enduring. An area that truly provides residents with the best of both worlds; far reaching countryside views and multiple access routes to the nation’s capital, makes this a great place to live – even before the rise of homeworking.

“The one downside for buyers – but a real upside for sellers – is that everyone wants to live here. As well as insulating house prices and demand for homes within the area, it also means that there isn’t a typical buyer here. Retirees, young families, downsizers, and London bankers all want to live here in equal measure which has helped to create a year-round community feel.

“The schools in the area, both state and private, are exceptional in Sussex, which is another significant draw for people to stay here or move to the area. Properties in good catchment areas and lovely locations will hold their price and secure a premium against similar properties that fall outside. Even if a property needs significant work, the benefit of the perfect location will never be overlooked by buyers here.”

Richard Addington, Director of Jackson-Stops Exeter, comments:

“An adjustment to asking prices has already started to filter down to the South-West market, in some cases a fall of 5%, however, for now there is not enough activity to offer a precise picture.

“Certainly a ‘wait and see’ mentality has set in, making the seasonally quiet period start early, but this also means the likelihood of more activity starting sooner next year, as savvy buyers look for early opportunities.

“As activity picks up in the New Year ahead of the Spring bounce, we expect to see a lot more movement which will lead to a more balanced market in Q2 2023.”

Crispin Harris, Director of Jackson-Stops Alderley Edge, comments:

“Property prices in the North-West are holding firm due to a continued lack of supply and ever-increasing level of buyer demand.

“If buyers did have a greater choice of homes to choose from over the next few months as we bed into the new year, this is when we’ll start to see house values rebalance. Not a significant or instant drop, but if the scales did shift over time, we would expect an adjustment of between -2% and -4%.

“In turn, this would likely mean that properties of the highest calibre will stand out more and command the best possible price. With fixed mortgage deals coming to an end in 2023, this could see a little more supply come to market in the first quarter, as some buyers opt to move into short-term rentals after selling while they wait to see how mortgage rates adjust as the year goes on.

“We expect the downsizing market in the North-West to be prevalent and a large motivator for buyers in 2023, particularly in the prime market with properties over £2 million, as well as large family estates where the children have fled the nest.

“The attraction of a modern, more manageable home is becoming increasingly compelling as the cold winter sets in. As well as being more efficient to maintain, this also frees up equity for family and retirement, and can see many buyers live mortgage free.”

Country Lettings market

The country house lettings market will be underpinned by poor supply and fierce competition amongst tenants in 2023. For landlords in a position to establish or add to their portfolios, there are options across the market that can provide strong yields for modest upfront investment. Rents rose by 3.2% in Q3 2022, according to Rightmove, whilst demand is up 20% and the number of available properties down nearly 10%. Recent mortgage rate increases, a squeeze on savings and the end of Help to Buy mean that even with rents inflating, demand from tenants is only likely to increase in 2023 as would-be first-time buyers turn to the private rental market long term. Therefore, Jackson-Stops predicts rental asking prices to increase steadily across 2023 by between 2% and 5%.

Will Jordan, Lettings Director at Jackson-Stops Cheshire, comments:

“The continued disparity between current under supply and growing consumer demand will be sure to push rents higher in 2023, though the curve will temper slightly as a natural consequence of renter’s budgets coming further under strain due to the rising cost of living.

“Blended families, couples, divorcees, and young professionals moving out of the family home will always need a place to go if they are not yet able to buy. Particularly for those currently building a deposit for their first home that may have been forced to push back their plans due to rising borrowing costs, the need to stay put for a little longer will cement demand for private rentals.

“There are several reasons why the issues around supply will also continue to impact the rental market. While the country continues to fall short of its historic 300,000 new homes per year target, a dearth of new landlords entering the market and an unsettling political environment has tightened the supply noose.

“For some savvy investors, this has created a small pool of opportunity in areas where yields remain high, particularly in buildings that require little upkeep or modernisation.”

London Lettings market

Joanne Lilly, Lettings Director at Jackson-Stops Pimlico and Mayfair, comments:

“Pent-up demand over the last 12 months has seen the number of tenants registering with us more than double since the start of the year and there are no signs of this slowing down.

“Super prime tenants are also looking for a stake in the capital with a noticeable resurgence in relocators returning in vast numbers.

“Our Corporate Lettings and International Relocation team have been especially busy working alongside blue-chip companies, embassies, and individuals from around the world.

“A recent example of this is when we found a corporate tenant for a property on Holland Park within 24 hours of it coming back on to the market, at an asking price of £14,000 per month. This competitive appetite from tenants looking for a high quality, centrally located rentals will continue to grow into 2023.

“London continues to be a safe investment for landlords, who stay with us on average for a 10-year period. Long-term tenancies at an average of 24 months are increasing, providing both the tenant and landlord some reassurance and a continued healthy return on investment.”

London Sales Market

Harry Buchanan, Director of Jackson-Stops’ Pimlico & Westminster branch, comments:

“There is every reason to think that the property market will remain stable in London, with consistent supply and demand numbers week on week.

“Boomerang buyers that jumped ship to the sticks since the pandemic are on the up, as their rural broadband doesn’t keep pace with their busy working life. Similarly, the return to office life has seen the scales tip back in favour of the urban bolt-hole that offers on the doorstop conveniences that cannot be rivalled.

“A huge proportion of London buyers are cash, making the prime market in part mortgage immune. To put this into figures, 43% of all deals in our pipeline are cash buyers, representing a much more agile buyer profile protected from economic headwinds.

“Cash purchasers are also chain free, making their transactions smooth sailing unlike some other parts of the country that are seeing more complex chains with higher risks attached. Looking ahead, as more mortgage products return to the market, we may well see more buyers, not less.

“The need for more space and lifestyle changes are the bottom line for these buyers. Traditional reasons for moving are always the core of our market: hatch, match, and dispatch. Pricing will dominate the headlines next year, with London often the benchmark for housing trends that ripple out throughout the country. The market here is in good shape, and if London is the ultimate market thermometer, then we are in good position to predict a fairly positive and stable outlook for the next quarter.”

New Homes outlook

New-build homes with strong eco credentials will continue to be sought-after in 2023, as buyers become far more conscious of their carbon footprint with a desire to reduce their energy bills. Properties where ground source heat pumps, solar panels or electric car charging points have already been installed offer a real plus and can help developments stand out to prospective buyers. Buyers will be varied throughout the year across the new homes market, with this diversity peaking in the East of England with strong interest registered from young couples and first-time buyers looking to get a foothold on the market with the perks of modern building techniques and high spec features.

Sarah Walsh, Head of New Homes at Jackson-Stops’ Ipswich, comments:

“As we head into the new year and another phase for the property market, new-builds with standout features will capture buyers’ interest. From beautiful sea views, high EPC ratings, and proximity to good schools or local amenities, the most committed buyers will be prepared to pay a premium for a top-quality home and location in one.

“New homes that offer a future-proof lifestyle will be high on the agenda in 2023, with features such as electric car charging points, solar panels, air source heat pumps and upgraded insulation acting as crucial deal makers to convert a sale.

“A continuation from last year, demand for village life in leading locations where community is at the fore remains paramount in the new homes market, from bustling farm shops to thriving local pubs within walking distance.

Particularly for those looking to buy their first home, a new-build development just outside of an urban hub means getting more space for their budget, whilst fitting in with their flexible working lifestyle and access to green views.

“With rents rising and mortgage rates stabilising, it’s likely the new year will bring a renewed sense of urgency for many buyers’ searches, and developers are likely to respond in kind particularly as they reach their year-end targets, providing opportunities for both parties.”

 

Kindly shared by Jackson-Stops

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