What will the housing market look like this spring?
23 February 2023
By Jeremy Greer
There are many things happening in the housing market in early 2023 that are going to have an impact on how it looks come the spring.
To answer the question of what the housing market will look like this spring as thoroughly as possible, we must break down the market into four categories and then assess the mood music.
Are house prices going down?
House price growth might, after eight successive rate rises, be finally slowing down. Property prices showed a gradual decline in value from last year, with a drop as high as 2.4% last November, with the subsequent drops more modest. In January, the average house price fell from £281,713 to £281,684.
That’s less than .1% of a fall. Which suggests there hasn’t been that much of a slowdown. It will be instructive to see what those figures are like at the end of the month, after the latest interest rate rise.
Are interest rates going to stay at 4%?
Maybe. And then again maybe not.
The Bank of England will meet again on the 23rd March to decide whether to put the rate up again. It’s possible there might be another rise but this is dependent on whether inflation is showing signs of being under control.
Are people still looking to sell?
The factors that lead people to put their property up for sale are still there. Relocating for a new job, expanding family, downsizing, selling a second home or debt remain the driving forces behind putting up that sale board.
Experts says that Spring – March, April and May – are traditionally the best times to sell a property. Data from Rightmove supports the idea that March is the best month to put your property on the market, with the average time for the home to go under offer being 57 days.
Are people still looking to buy?
Britain’s largest housebuilder, Barratt Developments, reported an increase in sales in January. It expects to complete between 16500 and 17000 sales during the year, as long as the momentum of January continues.
Consumer confidence was weakened during the final months of 2022, after the disastrous budget of September and the successive interest rate rises.
The tentative optimism has been helped by some borrowers offering better deals. Virgin Money have a 3.99% for people borrowing between 65 and 90% of the cost of the home. But the deal is a 10-year fixed rate. HSBC are offering the same rate but on a five-year fix.
It's uncertain whether these offers will be enough to convince First Time Buyers to come forward. There will be much focus on what decision the BoE makes in respect of interest rates on the 23rd of March. It is also possible that many will be looking to make their mortgage applications before deals are taken off the table, if there is another change in the base rate.
There seems to be enough to encourage some that the oft-predicted crash is not going to happen. What we are seeing is caution. Lenders like Virgin Money offering 3.99% but only on a 10-year fixed rate. Data supports that spring is a good time for the property market, as the industry recalibrates after the difficulties of the end of 2022.
Things are on the edge though. If inflation is finally on a downward turn, the need for even more drastic interest rate rises is minimal and the industry can start to feel more optimistic about the immediate future. Spring will be a perfect time for optimism to be rekindled as buyers and sellers come back, as they historically always have.
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