The UK Property Market in 2023: Signs of Slowing After a Red-Hot Pandemic Rebound
The UK property market saw astronomical growth following the initial pandemic slowdown in 2020. However, as we move through 2023, signs are emerging that this rapid expansion may be cooling off. This article will examine the factors influencing today’s UK property market.
Pandemic Rebound and Growth
After a sharp decline in transactions during initial COVID-19 lockdowns in 2020, the UK property market experienced a v-shaped recovery. By early 2021, buyers were out in droves, fueled by pent-up demand, stamp duty cuts, and shifting preferences towards larger homes and outdoor space [1].
This frenzy pushed average UK house prices up 10.8% in 2021 alone [2]. Growth continued through 2022, albeit at a slower pace, with annual price gains reaching 9.8% by December 2022 [3]. Regions outside London saw the hottest markets. For example, average prices in Wales rose 16% in 2021 [4].
Causes for Recent Slowdown
While still robust, data suggests the meteoric growth of the past two years is slowing down as we enter 2023. The average UK house price dipped 0.3% in January 2023, the first monthly decline since June 2021 [5]. Newly agreed sales also decreased 30% in January compared to the prior year [6].
Several factors are driving this cooldown:
- Affordability squeeze – Rising inflation, interest rates and living costs are diminishing purchaser budgets [7].
- Economic uncertainty – Buyers are more cautious amidst recession warnings [8].
- Supply/demand rebalancing – More listings are coming onto the market [9].
- Stamp duty changes – Cuts expired in 2021, increasing transaction costs [10].
- Investor pullback – Buy-to-let purchases dropped in 2022 after years of growth [11].
Outlook for 2023
The UK property market is moving towards rebalancing after a white-hot pandemic rebound. While a sudden crash seems unlikely, slower price growth along with stagnating or moderate declines in 2023 would bring welcome relief to first-time buyers.
Higher borrowing costs may push more potential purchasers to the sidelines temporarily, but demand remains robust, especially for discounted properties [12]. With factors like immigration, urbanization and undersupply still supporting the market long-term, the downturn is expected to be modest and measured overall.
References:
[1] https://www.bbc.co.uk/news/business-56017419
[2] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/december2021
[3] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/december2022
[5] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2023
[6] https://www.rics.org/uk/news-insight/press-releases/january-2023-rics-uk-residential-market-survey/
[9] https://www.naea.co.uk/about-us/house-price-index/