Property news makes the headlines every year for one reason or another, but in 2023 we can probably expect to see more about the property market in the media than usual. There are four key reasons for this:
- House prices may be reported to fall month-on-month
It’s true that, at the moment, some of the indices are reporting month on month falls, but while doing that, they are still reporting rises year on year – and these tend to be a much more accurate measure than erratic month on month reporting. For example, Rightmove showed month on month falls of 2.1% in December 22, but January 23 reported a rise of 0.9%.
Whatever is happening to property prices, as a landlord investing for the long term, it’s important to look at the long term. Values rose well over the pandemic, with some areas and properties seeing double-digit increases. And, although annual growth reduced through 2022, Zoopla’s data shows that average house prices still rose by 7.2% in the year - that’s an increase of around £17,500 for the average property.
Looking further forward, the predictions show that property prices should be higher in five years’ time than they are now, so the long term outlook remains positive.
2. With the Bank Rate rising, there are bound to be news stories about mortgage rates
We saw plenty of stories in the media last autumn after the Conservative ‘mini-budget’, when lenders pulled primarily fixed rate mortgages, interest rates jumped up, and some buyers were reporting they couldn’t get a rate much below 10%. However, those were only in exceptional cases and the reality was that once Rishi Sunak took over from Liz Truss in October, rates began to fall again.
Now, although the Bank Rate is currently at its highest in 14 years and is predicted to rise by another percent by the middle of this year, mortgage rates are expected to stay fairly stable. For Buy to Let mortgages at 75% LTV, there are currently 2-year fixed rates from around 4.49% and 5-year fixed from around 4.79%, while variable rates can be secured even lower.
3. The continuing global focus on climate change and current cost of living crisis will keep energy efficiency in the home high on the agenda
Energy efficient products and energy saving measures – particularly smart meters - have been well publicised in recent years. In 2023, with the cost of living crisis and energy prices soaring to record highs, we can expect regular news reports on the best ways to heat and live in homes so that bills are kept as low as possible and properties are kinder on the environment.
For landlords in England, Wales and Scotland, there may be also some news on the planned introduction of a minimum ‘C’ EPC rating for new tenancies - currently proposed to come into force in 2025, with existing tenancies to be compliant by 2028. However, although this raising of the minimum energy standard has been in the works for some time, both landlords and the wider letting industry are hoping for clarity this year.
4. With the general election in 2024, we can expect more new housing policy announcements
The Conservative Government published two White Papers in 2022 relating to the housing market - ‘Levelling Up the United Kingdom’ in February and ‘A Fairer Private Rented Sector’ in June. As we enter the run-up to the 2024 general election, we can expect to hear more details on these proposals from the Conservatives and possibly some legislation being passed, as well as announcements on proposed new policies from the other main parties.
Properties for rent are in short supply
One thing that’s had relatively little coverage so far is the growing rental market issue of very little stock available and high demand, which is continuing to push rents up for houses and some flats. That means it’s very much a landlords’ market and with plenty of prospective tenants to choose from, you should be able to have your pick of the best applicants, secure a great monthly rent and virtually eliminate extended void periods between tenancies.
Nevertheless, two important things that still apply are:
- To attract the best tenants, you need to be offering a great home – that’s one with good-quality fittings, a high standard of décor and, increasingly importantly, a property that’s easy and cost-effective to keep warm, with eco-friendly features.
- No matter how perfect a tenant appears to be, you must carry out thorough referencing to be as sure as possible that they can afford to keep paying the rent and will treat your property well, which if doing a let only or managing your property, we will look after for you.
If you’re thinking of buying or selling property in 2023, although average property prices may be reported to fall, some experts are pretty far apart on how far they’ll drop. On the positive side, Zoopla is confident that the market will stay on a relatively even keel, predicting just a 5% fall if rates stabilise. Meanwhile, at the other end of the spectrum, Capital Economics has forecast an average reduction in value of up to 15%, taking the lead from what happened in previous recessions.
As always, while these averages give a rough idea of the overall market climate, they are unlikely to reflect what happens to your individual property because while the price of one particular type of property on a certain street might be plummeting, another property in another part of town could still be going up in value. If you’re planning to expand your portfolio this year and supply is outstripping demand in your area, you may be able to pick up a bargain from a motivated seller – but this is where local market knowledge and expertise comes into play.
Whatever your property investment plans are for the coming year, our experts will be very happy to help you understand the market in your area and can answer any questions you might have. Just get in touch with your local Reeds Rains branch – you can find contact details on our website.
Book a local sales or lettings property valuation today
Additional sources:
Current fixed mortgage rates: https://moneyfacts.co.uk/mortgages/buy-to-let/5-year-fixed-rate/
The Reeds Rains Content Marketing Team
