So, it is a testament to the robustness of the property market that the annual rate of price growth is currently 4.7%, while the average property valuation has risen by over £10,000 since last year and sits well above pre-pandemic levels.
That said, 2022 has proven that those of us in the specialist finance and property industry cannot take anything for granted. As we bring in the New Year, there are trends that will undoubtedly define the specialist finance and property markets in 2023.
Here are the key ones to look out for.
A cooling off period
The UK economy finds itself on the edge of a long recession. Therefore, the first trend to look out for is a cooling off period for the property market. The recession, when combined with the rising cost of borrowing and the end of the Help to Buy scheme, will limit market activity and demand.
In turn, this will push down prices, but perhaps not to the extent that they did in 2007. Low supply and the new stamp duty holiday should stop prices from falling as much as they have during past recessions.
Mortgage rates should come down
Another trend to look out for is the decline of mortgage rates. Since Rishi Sunak became prime minister, the ‘Truss premium’ has been removed from many lenders’ products. Meanwhile, markets have stabilised slightly, which has already caused many lenders to edge their mortgage repayment rates back down. Therefore, mortgage rates should fall further to around 5% by 2023 and could drop further if the BoE’s base rate peaks at 4.5%.
Rental prices will keep going up
A 2018 Royal Institution of Chartered Surveyors (RICS) predicted that rental prices could rise by 15% by the middle of 2023, which marks another key trend to look out for. With 142% more people looking for rental accommodation in 2022 than pre-pandemic, demand continues to outstrip supply, which will support prices in the new year. With some prospective buyers waiting for mortgage rates to relax, demand could actually increase as they settle for temporary accommodation in the private rental sector (PRS). This would push prices higher still.
The market will ‘go green’
Demand for energy efficiency is growing. As such, a key trend for 2023 could be the market ‘going green’ as landlords try to get ahead of regulations and capitalise on demand for green homes. The specialist finance sector will be vital in supplying landlords with the capital that they need to do that.
Clearly, there will be challenges for the specialist finance and property markets to contend with in the new year. However, there are still opportunities to be had for those landlords and investors who can adapt and capitalise on the trends that will define these markets in 2023. Those that can will contribute to the continued health of the UK property market, despite a brief cooling off period.
Source : BridgingCommercial