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Whether average property prices will fall by 10% or see further growth in 2023 remains to be seen. Depending on whom you ask, the next 12 months could see just about any eventuality become a reality for the UK housing market.

But what is safe to say is that when looking at the state of play today, there are several current trends set to influence the housing market in 2023.

Down valuations on the rise

The growing prevalence of ‘down valuation’ has been wreaking havoc on property transactions across the UK for much of this year. This is where surveyors place a value on a property that is less than its asking price, typically resulting in disputes between lenders and sellers while making it more difficult to close sales.

“As markets change, we can probably expect this difference in opinion to widen,” comments John Baguley at Countrywide Surveying Services.

As far back as the summer, many brokers reported encountering valuations that were as much as 20% lower than agreed property purchase prices, bringing major complications and conflicts into the negotiation process.

“There is a gulf between the reality of what buyers are willing to pay and what surveyors are willing to let go through,” said Jonathan Hopper of Garrington Property Finders.

This is one of many areas in which bridging finance could come into play as a potential solution, enabling buyers to sidestep the usual complications.

“In 2022, the most common use of bridging finance was to overcome a property chain break, surpassing its use to buy investment property,” said Stephen Clark

“We anticipate this will continue into 2023, as down valuations restrict homebuyers’ options, together with falling house prices, rising interest rates, and the cost of living.”

Auctions on the up

The popularity of auction property purchases has been gaining pace throughout the year as mainstream buyers and investors seek affordable homes and commercial properties via non-conventional channels.

Bridging finance provides buyers from all backgrounds with the opportunity to compete directly with cash buyers, enabling the completion of fast transactions while beating rival bidders to the punch.

“We have seen rising demand from auction buyers for bridging finance, enabling them to move at speed with flexible terms,” adds Stephen Clark

“Again, we expect this pattern to repeat itself through 2023 as more properties come up for auction.”

Total bridging loan volumes continue to hover around all-time highs, likely due to the fact that average monthly interest rates remain historically low.

“Some brokers are offering rates below 6% (annually), whereas the Halifax headline rate is above 6%. Bridging loans are extremely competitive at the moment,” commented Vic Jannels on behalf of the ASTL.

A quoted annual rate of 6% on a bridging loan would equate to 0.5% per month, leading up to a uniquely cost-effective facility when repaid promptly.

Putting the brakes on the chain breaks

Avoiding or repairing broken property chains has become the number-one use for bridging finance in the UK for the first time this year. For a broad range of reasons, homebuyers are turning to fast-access bridging loans to enable them to complete planned transactions in time-critical situations.

“Borrowers who have had mortgage products withdrawn with little or no notice or have lost their sale due to their buyers no longer fitting mortgage affordability criteria have turned to short-term funding solutions to ensure their purchase can go through as planned,” says bridging finance expert Stephen Watts.

Following several consecutive years at the top of the table, purchasing investment properties fell to second place in the rankings. Having accounted for 24% of all bridging loans issued in Q2, just 16% of transactions completed in Q3 were for investment property purchases.

 

After more than two years of record gains, average UK house prices are now predicted to fall in 2023. But while this may buck the trend of the past couple of years, the likelihood of a major crash remains low.

Even in the face of growing economic uncertainty and an unprecedented living-cost crisis, demand for quality homes in desirable areas of the country remains strong.

October brought the first decline in average UK house prices in 28 months, according to data published by the Royal Institution of Chartered Surveyors. The same survey also found that house price expectations among market watchers and analysts also slumped for the first time in over a year.

Experts now believe that a decline of around 4.7% in average house prices will creep into the equation by the end of next year. This will mark the first annual drop recorded in over a decade and comes in stark contrast to the enormous annual house price gains collected over the past couple of years.

But as average house prices increased by almost 6.3% in 2022 alone, the declines forecast for next year are unlikely to have a huge impact on overall affordability.

“There is a rebalancing, but nothing like we saw after the global financial crisis. Supply is still relatively tight, so that is helping support prices,” said Chris Druce at estate agency Knight Frank.

Data from the Land Registry suggests that while average UK property prices fell by approximately 19% during the last global financial crisis, they have since doubled.

Supply issues continue to fuel higher prices.

Several major UK housebuilders have indicated that they have built fewer homes this year than originally planned, due largely to supply chain issues and escalating costs.

Taylor Wimpey Plc said that its housebuilding targets for 2022 would not be met, while Persimmon Plc has predicted 2023 land additions to be lower than in 2022. These and other factors will continue to affect the availability of housing across the UK, fuelling high prices.

Looking further ahead, 2024 is predicted to bring a slight increase in overall property prices: total annual gains of around 1%. After which, a further 3.5% increase has been forecast for 2025.

As polled by Reuters, experts believe that while a housing market crash cannot be ruled out of the equation, the more likely scenario is a correction. More than half of those polled said that the possibility of a crash remained high for the time being but that its impact would not be quite as severe as those experienced in the past.

“We see a one-year correction in 2023, with the economic performance and job numbers a little better than expected. 2023 will be a very difficult year, but life will feel semi-normal in 2024,” said Tony Williams at consultancy Building Value.

Even so, analysts have such wildly differing opinions on what will happen over the next 12 months that forecasting anything with even a slight degree of certainty is almost impossible. In London, experts believe that anything from a 12.5% drop to a 4.0% rise in average house prices could be recorded next year.

“Prices have continued to fall in London due to exacerbated affordability issues. New builds are also likely to plummet in London as build cost inflation and reduced development finance start to bite,” said Mark Farmer at Cast Consultancy.

 

 

In what Cambridgeshire Police have called a “truly brazen crime”, a private tenant has been jailed for attempting to sell the home he was renting in order to make off with the proceeds.

41-year-old Andrew Smith moved into the three-bedroom home in Cambridge in early 2020, only to list the property on the market just two weeks later. The listing was published via a non-existent online estate agent in the hope of tricking a desperate buyer into a quick sale.

And he almost succeeded, with one interested party coming dangerously close to handing over £400,000 for the property he didn’t even own. The price was agreed, and the sale was on its way to being finalised when an inspection by the buyer (accompanied by a drain surveyor) prompted suspicion.

After speaking to neighbours who said they were almost certain the house was being rented to its current occupant, he called the police. The subsequent investigation found that M upon. Smith had even rented furniture to stage the property for viewing by prospective buyers in order to sell it faster and for a higher price.

He was detained in Bedford and accused of engaging in money laundering and fraud by false representation. Having helped turn a quick profit at the expense of an unsuspecting buyer, Mr Smith was sentenced at Brighton Magistrates’ Court to two years and six months in prison.

“This is an almost unbelievable and truly brazen crime, which saw an innocent buyer almost part with more than £400,000 for a property that was never for sale in the first place,” said Detective Constable Dan Harper.

“The investigation has been long and detailed, and we have worked tirelessly to make sure justice has been served.”

A stark warning

Despite having been labelled an “almost unbelievable” crime, the prevalence of these types of incidents has been growing across the UK for some time. In particular, rapidly rising levels of “title fraud” are prompting homeowners in record numbers to register for property alerts with the Land Registry.

Incredibly, research suggests that as many as 97% of homeowners face the threat of their properties being sold illegally, without their consent or their knowledge.

From 2020 to 2021, the Land Registry recorded a 300% increase in the number of people registering for property alerts. According to new information released by Third fort based on a Freedom of Information Act request, more homeowners than ever before appear to be taking title fraud seriously.

But even now, a mere 515,000 property owners have so far registered for the service, which is provided 100% free of charge in England and Wales. This equates to just 2.5% of all property owners, suggesting that almost 98% face the very real risk of falling victim to title fraud.

As explained on Gov.co.uk:

“We will send you an email alert each time there is significant activity on the property you are monitoring, such as if a new mortgage is taken out against it.”

“The alert will tell you the type of activity (such as an application to change the register or a notification that an application may be due), who the applicant is, and the date and time it has been received.”

“Not all alert emails will mean fraudulent activity. If you don’t think the alert email is about any suspicious activity, you don’t need to do anything.”

“Signing up for Property Alert won’t automatically stop fraud from happening. You will need to decide if the activity on the property is potentially fraudulent and act quickly if so. The alert email will tell you who to contact.”

 

Skyrocketing rent prices have been pricing prospective tenants completely out of much of the market for some time. Coupled with the escalating living-cost crisis, millions are finding it difficult (if not practically impossible) to make ends meet.

When and where the whole thing will begin showing at least modest signs of improvement remains to be seen, but things are almost certainly going to get worse before getting any better.

Younger people in the capital are finding themselves particularly hard hit, where the average cost of renting a home has always been disproportionately high. With average weekly rents having once again broken all records, a sizeable proportion of London’s private renting community is considering leaving the city entirely.

According to a new study conducted by the charitable foundation Trust for London, the average cost of renting a home in London is now £533 per week. This represents an increase of more than 16% since the same time last year, at which point private rentals were already completely unaffordable for many.

As a result, as many as one in four young renters are now saying they may be forced to leave London in the near future due to their growing inability to pay their bills and sustain their lifestyles.

Wages are insufficient to cover living costs

The study also indicated that between April and March this year, the average rental price for a one-bedroom property in London was the equivalent of just over 46% of the average Londoner’s gross median pay. By contrast, renters across the rest of the country use around 26.4% of their gross median pay for rent.

Reporting separately, Foxton Estate Agents said that one of the drivers behind skyrocketing rent prices in London was explosive demand, coupled with minimal available inventory. They said that around 23,000 rental properties were listed on the market in September, meaning that an average of 29 people were competing for each property listed.

There are approximately 9% fewer properties available on the private rental market in London than at the same time last year, while demand has increased by as much as 20 per cent.

Consequently, as many as 20% of younger people are planning on leaving London entirely, as they simply cannot afford to keep spending so much of their money on rent costs alone.

Prices are likely to continue rising

As more and more people pile back into big cities following the mass exodus prompted by the coronavirus crisis, average monthly rents in London are predicted to continue increasing.

Speaking on behalf of Hamptons, head of research Beveridge said that the return to the new normal would most likely continue pushing average London rental prices higher.

“With COVID-19 being pushed further to the back of people’s minds, life in the capital is slowly returning to its new normal. Tenants are returning to the bright lights of the city, and this is driving rental growth to record highs,” she said.

“The rise of remote working means that fewer tenants are moving to the capital specifically for work. In fact, a growing number of tenants choosing to live in London are working fully remotely and could live nearly anywhere in the country. The footloose nature of many jobs today means that it will be culture and lifestyle rather than employment that become the capital’s biggest draw.”

“The current pace of London rental growth is predominantly down to the capital playing catch up with the rest of the country.”

“Today, the average rent in London stands 103% above the average outside the capital. While this gap is up from 96% a year ago, it remains below the 120–30% pre-COVID-19 premium, which has been eroded by strong rental growth outside the capital in recent years. But the current pace of rental growth in London is likely to push the premium closer to its pre-COVID-19 level within two years.”