The housing market has seen some turbulence over the past few years, with 2022 being no different so far. With the year coming to a close, what should you expect to see in 2023?

Thanks to a recent Zoopla webinar, we've pieced together some useful bits of information to help guide you through the housing market in the next 12 months.

Crunching the numbers

The hot topic over the last few months and one of the key market impactors is the recent hike in interest rates, peaking at 7%. 

Whilst they have settled to around 6%, the days of rock bottom 2% mortgages look to be a thing of the past.

Zoopla are estimating rates to fall to 4-5% in 2023.

In real terms, if someone could afford a 75% mortgage on a £193,500 property whilst rates are at 2%, a rate increase to 6% would reduce their buying power to £126,698 to keep monthly repayments the same.

Source: Zoopla calcs

Mortgage rate hikes don't affect everyone equally however, it was reported that 50% of all purchases in 2021 were either cash purchases or purchases using a small mortgage (below 50% LTV), but there is no denying they have a heavy bearing on the market.

Source: Zoopla research analysis of HMLR BoE PSD data

Supply vs Demand

The average number of residential transactions over the past 40 years has been 1.2 million annually, with 2021 seeing high volumes of 1.5 million. 2022 is expected to end with approximately 1.3 million sales.

2023 is predicted to see a 15% decrease to 1.1 million.

This doesn't sound great on the surface, but even in 2008/2009 when the UK faced major problems obtaining credit and a deep recession, annual sales went to around the 800k-900k mark. 

Source: Zoopla research / HMRC

Financial difficulty does slow the housing market but by no means grinds it to a halt.

The supply of rental properties has remained stagnant since 2016. Reasons include seasoned landlords selling their portfolios, the tightening of regulations and more stringent tax implications. 

These supply issues combined with the increase in demand are a recipe for an increase in rents across the board. The Zoopla report expects rents to increase by approximately 5% in 2023.

The North prevails

In many parts of London and the south of England, where average yields are typically low (5% and below), landlords are looking to put down deposits higher than the minimum to make investments more feasible. 

Landlords wanting to start or continue investing, using maximum leverage, higher-yielding areas like East Yorkshire are likely to be chosen with more desirable investment prospects. 

We expect more landlords from further afield coming to invest in Hull and East Yorkshire where average yields are between 6 - 6.5%.

Source: Zoopla

The market madness isn't quite over yet, but with interest rates expected to decrease and rents to continue rising, property investment will start to look more attractive to those investors keeping a close eye on the market.

Looking for support investing in this market?

Sign up for our portal to receive investment opportunities straight into your inbox that are worth investigating in the current market.

As always you can contact our Investment Manager, Dave, with any questions you might have. He can help you choose and execute a strategy to reach your investment goals.

dave@ultralets.co.uk

01482 562562 

Dave on LinkedIn