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House price predictions 2023

Here we look at the different factors that influence the price of property and what is expected to happen in the coming years

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 9 March 2023

9 min read

House price predictions 2023 

 So, what’s next for house prices? Anyone planning to buy or sell a property in the UK will be understandably concerned about the future value of their home. You may be wondering if now is the right time to move. 

Whether you have a property to sell, or if you’re buying a property for the first time, it’s been difficult to predict what might happen in the future. There are lots of different elements to house prices in the UK and especially now, with the added uncertainty in the economy and cost of living crisis. 

Here we look at the different factors that influence the price of property and what is expected to happen in the coming years. 

How do house prices work? 

There are four main elements driving the changes in the value of property in the UK. These can often be predicted and you can also do your own research in your local area. 

  1. State of the economy – the simple reality is that in good times when the economy is strong, buyers have more confidence and may be willing to pay more for property. In times of economic uncertainty, such as we are in right now, there will be less confidence and fewer borrowers. 
  2. Bank of England Base Rates – when the Bank of England (BoE) increases its Base Rate (such as recently), people are unable to afford higher borrowing levels on their mortgages. When interest rates are low and affordability is good then people will tend to be prepared to borrow more. 
  3. Housing supply – if an area is in high demand or if there is a shortage of properties for sale in an area, then prices are likely to be pushed up. This can also be influenced by things like local housing developments and planned construction projects in a certain region or area. 
  4. House demand – if an area is in high demand then it is highly likely that prices will increase. London in recent years is a good example of this. When there are higher levels of buyers for a certain area then we often find that house prices are inflated. 

What’s happened to house prices recently? 

Recently there has been significant movement in house prices in the UK which has been driven by unpresented movement in the British economy and the global pandemic. 

We’ve seen house prices increase dramatically from abnormal requirements of buyers and the seismic shift in behaviour, mainly driven by a dramatic change to how we work. The pandemic drove many buyers in to looking at other requirements that have never existed previously and now the new norm, which is mainly for more home working and less demand for city living. 

There was also the impact of the Stamp Duty holiday which was running up to September 2021, designed to protect the housing market throughout the pandemic.  

We’re now seeing the other side of this trend where people are returning to more normal working patterns, but still many employers offering flexible working. The other significant impact on house price predictions for 2023 is the massive recent increases to the interest rates in the UK, driven by the Bank of England (BoE). 

What is the House Price Index? 

There have been House Price Indices (HPIs) in the UK since 1973, which were originally produced by mortgage lenders, but more recently are operated by the government and property websites. 

A house price index (HPI) uses a set of data and calculations to forecast potential changes in the housing market, both regionally and nationally. 

Compare House Price Indices 

Below is a table showing a summary of the main characteristics of the top House Prices Indices (HPI). 

IndexSource of DataTransactions per monthCoverage areasRecord of transaction stageWeighting
UK (HPI) House Price IndexHM Land registry, register of Scotland and NI Property Services100,000 transactions approx.UK – all salesRegistration of saleUpdated annually
Nationwide HPINationwide mortgage lending12,000 transactions approx.UK – mortgage completionsMortgage approvalUpdated every 2 years
Halifax HPIHalifax mortgage lending15,000 transactions approx.UK – mortgage completionsMortgage approvalUpdated annually
Land registry HPIHM Land Registry price paid data80,000 transactions approx.England and Wales – all salesSale registrationUpdated annually
Rightmove HPIProperties advertised on Rightmove website100,000 transactions approx.England and Wales – all salesDate of advertUpdated annually

As you can clearly see from the table above, the UK House Price Index uses the most accurate and up to date data. It’s hardly surprising that the HPI produced by the government uses higher levels of transaction data and has access to data that is not available publicly. 

Data sources for The UK House Price Index includes the HM Land Registry, Register of Scotland, and NI Property Service. This means that the figures it produces are more accurate and up to date, even though there tends to be a 2 to 3 month delay. 

The table below shows the past 6 months of data from the UK House Price Index 

UK HPI July 2022  August 2022 September 2022 October 2022 November 2022 December 2022 
Average house price £292,118 £295,903 £294,599 £296,422 £294,910 £294,329 
Annual price change 15.5% 13.6% 9.5% 12.6% 10.3% 9.8% 
Monthly price change 2.0% 0.9% 0.0% 0.3% -0.3% -0.4% 

Rightmove House Price Index 

This is one of the leading House Price Indices from some of the UK’s leading house sales portals. These data sets are different to others because of the simple fact that they use pre-sales data and not completed or mortgage offer data. Rightmove House Price Index uses data from its own portal which is the largest and most widely used in the UK. 

Clearly we can see that there are discrepancies between the data recorded by Rightmove and those recorded by completed sales. This is a reflection of properties being advertised in the UK rather than those being sold. 

RIGHTMOVE HPI August 2022  September 2022 October 2022 November 2022 December 2022 January 2023 
Average house price £365,173 £367,760 £371,158 £366,999 £359,137 £362,438 
Annual price change 8.2% 8.7% 7.8% 7.2% 5.6% 6.3% 
Monthly price change 1.3% 0.7% 0.9% -1.1% -2.1% 0.9% 

Nationwide House Price Index 

One of the most widely used of the lender based house price indices is the Nationwide House Price Index. This uses data which has been collected from its own mortgage completions within the past several months and beyond. 

This set of data helps to show the level of mortgage borrowing that is being provided for mortgage based purchases in the UK. This data is also updated more quickly than most of the other House Price Indices. 

NATIONWIDE HPI September 2022  October 2022 November 2022 December 2022 January 2023 February 2023 
Average house price £272,259 £268,282 £263,788 £262,068 £258,297 £257,406 
Annual price change 9.5% 7.2% 4.4% 2.8% 1.1% -1.1% 
Monthly price change 0.0% -0.9% -1.4% -0.1% -0.6% -0.5% 

Why are house prices changing in the UK? 

Following the recent apparent boom in house prices over the past 2 years, caused by the Stamp Duty Holiday and low interest rates, house prices have now slowed and even started to retract in some areas. 

The UK housing market saw a slump initially through the initial lockdown periods as sales of houses understandably almost ground to a halt. The government then reacted to this by introducing the Stamp Duty Holiday in 2020 in an attempt to kick start the housing market again. This combined with record low interest rates, and the need to change our working patterns, drove growth of around 20% between 2020 and 2022. 

As interest rates have increased and the recent ‘cost of living crisis’ has taken effect, we’ve seen a major reduction in buyer confidence in the UK. The past 6 months has seen mortgage rates increasing to pre-2008 levels and buyers have been left feeling uncertain about their own finances as well as affordability. 

We also saw an end to stress testing in UK mortgages which had an impact on the amount of mortgage lending and our ability to borrow. Mortgage approvals have started to increase again slightly but are still relatively low compared to 2020 and 2021. 

The mini-budget measures announced by Kwasi Kwertang in September ’22, also caused a slump in the levels of house sales as he announced major changes to steady the British economy. Mortgage interest rates rose by an unprecedented 0.75% to 3.0% in November ’22, which was quickly followed by a further two increases totalling 1% in December ’22 and January ’23. 

Average house prices have continued to grow over the past 2 years from just over £240,000 in October 2020 to £296,000 in October 2022. 

Should I move home in 2023? 

Considering whether to move home or buy a new property can be difficult for many of us and thinking about future values of houses in the UK. Many of us are concerned about buying houses at an apparent peak with the possibility of prices dropping in the future. 

There are several key things that we need to consider when thinking about the potential for house prices dropping. Firstly, interest rates have now increased to 4.0% with the potential for further rises of up to 0.5% according to economic experts. Even though this might seem high, a peak of 4.5% is actually a brighter outlook than many predicted. 

Secondly, mortgage rates have now started to fall again after a great deal of uncertainty in lending towards the end of 2022. Mortgage rates were dramatically increased to an average of around 6.0% for fixed rates and the number of mortgage deals available were reduced by around 40%. Mortgage lenders have now started to stabilise and re-introduced fixed rate deals under 4.0% again for some borrowers. 

Even though the mortgage market and interest rates have increased, estate agents are still reporting lots of interest from buyers. Currently we’re seeing supply is much lower than the demand for houses which is causing houses to sell more quickly and potentially still at a higher value. 

Mortgage lenders are still cautious about valuations on properties and less likely to lend on an inflated house price over a valuation. There are projections showing that house prices might continue to drop through 2023 and up to around 10% in some areas. 

First-time buyers and people moving from rented property in to their own homes could be in a stronger position this year. Now could be an ideal time to look at your options for getting on to or back on to the property ladder. 

Those selling a property and buying a new property will be less likely to see any major advantages to downsizing or upsizing. The net effect of house prices should cancel itself out for people moving home, and ultimately leave you in a neutral position.

How to find out what my property is worth 

There are a number of extremely useful resources for those looking for an indication of the value of their property. Mortgage lenders also use similar methods, especially when they value a property for remortgage purposes rather than using a property surveyor. 

None of these methods are 100% accurate but they can be used to give you a fairly accurate estimate of your property value. 

There are 3 main sources of data for getting a valuation on your property or for a property that you are looking to buy. This includes Property Websites, Land Registry Data and Estate Agents. 

  • Zoopla is the most popular and the most widely used house price valuations website. Zoopla can be easily accessed using your home postcode and house number. Your valuation will be based on house sales in your area (anything local that has caused house prices to fall), asking price data, and market conditions. 
  • Rightmove is the most common portal for buying and selling houses in the UK. Rightmove can also be used to generate an estimated property value
  • Mouseprice is another online tool that can be useful for a basic valuation and to tell you about recent sales information. You can also set up a free account to track the estimated value of your property over a period of time. The estimated value will be based on local sales data. 
  • Property Price Advice can also be a useful tool to give another estimated value based on sold prices in your area. You’ll need to provide your email address to set up an account and generate a figure for your home. 
  • Land Registry Data is also easily accessible online. This data will tell you when a property last sold for and for how much. This also provides useful information such as tenure and any restrictive covenants. 
  • Estate Agents in your area should also be able to give you a good idea of potential marketing value for your property. They should also be able to give you a realistic sale price. There is a shortage of properties being listed on the market at the moment so estate agency is a competitive market. 

If you are looking to buy a new property, move home, or remortgage your property, then it is advisable to speak to a qualified mortgage broker. Mortgage rates are fluctuating regularly at the moment. It is becoming more and more difficult to secure a rate or deal. 

It can be helpful to have additional advice and support when applying for a mortgage. Mortgages aren’t always a straightforward process, particularly with types of mortgage that are non-standard e.g. self build mortgages.

You can access mortgages online via several price comparison websites or you can speak to your own bank or building society.

Resources

Nationwide – House Price Index

Rightmove – Price Indexes Archive

Gov.uk – UK House Price Index: reports

Office for National Statistics – UK House Price Index: November 2022

Halifax – House Price Index

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