SPECIAL FEATURE: What is shaping the property market in 2023 and beyond? – Lucy Cromwell

SPECIAL FEATURE: Lucy Cromwell has written an article on the subject of what is shaping the property market in 2023 and beyond.

It is fair to say the property market has been on a bit of a rollercoaster in recent years, with Brexit, Covid and the cost of living all impacting on property prices and sales. Yet, demand still remains high, and houses are generally being sold soon after first being put on the market. 

However, it is still tricky for many first-time buyers to get on the ladder, with prices remaining high compared to average incomes. But there are support schemes and savings accounts out there to help, and it is recognised as a vital component of moving the economy forward.

Threat of recession

Perhaps the most immediate concern for the property market is the current threat of recession that is looming large over the UK. Hikes in energy prices, along with the war in Ukraine and the ongoing after-effects of Covid, has meant that the economy is in a precarious position. 

It is predicted that 1.5 million people will struggle to pay for bills and food during the recession, which may also mean that people need to downsize their properties or will be stuck in rental accommodation for longer than they had hoped.

Increased mortgage rates

The Bank of England base rate has been low since the 2009 financial crisis and was reduced event further during the depths of the Covid pandemic, but it is gradually creeping up again, with increases in six of the 12 months of 2022.

Since many mortgages track the base rate, this is bad news for anyone with a mortgage, who will see their repayments increasing and could result in defaults. It is thought that the rate could reach as high as 6% in 2023. 

Using a mortgage broker is a good option for anyone thinking of applying for a mortgage – whether as a new customer or as a remortgage option – as they will have access to the best deals and will be able to advise on what is right for each individual’s circumstances.

Stamp duty

Chancellor Jeremy Hunt reversed his predecessor Kwasi Kwarteng’s cut on stamp duty, when he presented his Autumn budget in November 2022, stating that the payment figures will revert back to £125,000 for homeowners and £300,000 for first-time buyers. However, this won’t be happening until 2025. So, it may be that the property market will be more buoyant in 2023, as people make the most of the higher thresholds while they still can.

Capital Gains Tax

If you are lucky enough to own more than one property, and make a profit from selling it, then you will be liable for Capital Gains Tax. The allowance on this (the profit you can make before you have to make any tax payments) has recently been halved, with the new rate being just £6,000, meaning many more people will need to pay out in tax than had previously had to. The rate is planned to halve again in 2024/2025, so some property owners may decide to cut their losses sooner rather than later and sell their additional dwellings while the rates are still decent. 

In the same vein, there has also been a freeze on inheritance tax until 2028, meaning the rates won’t rise with inflation, so property owners could once again be left out of pocket.

Help-to-buy support

As mentioned, there is still some help-to-buy support available, particularly for first-time buyers, but the government scheme which saw an equity loan of up to 20% of the purchase price is due to end in March 2023. Again, this may see a flurry of purchases in the first three months of the year as first-time buyers make their move, but could result in a sharp drop later on in the year.

The Help-to-Buy ISA closed to new applicants in 2019, but those who started saving before then still have until September 2030 to buy their property, with a whopping 25% bonus applied to their account when the purchase goes through.

Buyers’ v Sellers’ Market

With mortgage rates increasing, homeowners may feel the need to reduce the price of any property they are selling in order to attract interest. This makes it a buyers’ market, as they have the control. 

The past two years has seen the UK being a hot sellers’ market as demand outstripped supply and properties were snapped up. But now, this is in decline, and sellers need to be more realistic with their asking prices. We are already seeing prices reduced by up to 5% as properties fail to sell in the falling market, and this is likely to increase even further in the coming months. With that in mind, now is the time to buy, if you can.

Eco-friendly building regulations

This may be a left-field consideration, but the rise in eco-friendly requirements for new build properties and extensions could make property development a more expensive venture, with energy efficiencies needing to be included in any plans. 

The availability of such building materials could also be compromised, with currently unreliable supply chains, meaning that projects could take longer than expected.

Final thoughts

It is difficult to predict how the housing market will fare in the coming year, with so many variables coming into play. 

The financial implications of the economy and cost of living on homeowners and prospective homebuyers could have a detrimental effect, or it could mean prices return to a more stable level that actually allows more people the opportunity to buy property, who might not have been able to in recent years, when the market has been more buoyant.

Lucy Cromwell

Lucy Cromwell, a contributor to Inside Conveyancing, has many years of experience working in property management and has recently turned her focus toward establishing herself as an authority in the industry. Connect with Lucy on LinkedIn.

Kindly shared by Lucy Cromwell

Main photograph courtesy of Pixabay