Over the last few years there have been anything but bargains in the property market, with price rises of 10% annually in many cases. And in periods of rising property prices it’s easy to forget that property markets tend to be cyclical: Periods of sharply rising prices are generally followed by periods of falling prices .... before they begin to rise once again.
So now might be a good time to ask whether the tables might be about to turn. And whether there might be bargains to be had in the property market in 2023.
First let’s look at what can lead to possible bargains becoming available in the property market.
Falling demand can be one reason why property prices fall. Buyers are less willing to buy, so sellers who want to sell have to drop their asking prices or accept lower offers.
Distressed sales are another factor that can cause prices to fall. Some property owners fall into financial difficulties and have to sell. Some properties are repossessed and sold off for similar reasons.
So next let’s look at a few facts that might indicate whether there will be property bargains to be had next year.
The economy isn’t likely to do too well. An extended period of recession is likely. That means fewer people are likely to want to buy property and more may need to sell. Less demand and more supply is the classic reason that prices fall.
In times of recession, however, people decide not to move either. Some people may fall into a negative equity situation and so can’t sell. But instead have to sit tight and wait for prices to recover. The fact that there are fewer properties on the market helps to support the values of those that are available for sale.
This report quoting Zoopla says that homeowners are already being forced to settle for below asking price. (It doesn’t point out, however, that until very recently it was pretty much standard practice to accept offers under your asking price.)
Landlords have been impacted by increasing legislation and costs over recent years. A trend of more landlords deciding to sell up seems to be emerging – although it’s very hard to find definite evidence of this.
Landlords selling up could in fact be having a very unusual impact on the market. As less property is available to rent it seems to be pushing up rents. If prices soften this could actually push up yields or returns for investors. So some landlords may actually decide to buy more properties, not sell them.
This expert report says that one in five landlords are planning to reduce their portfolio size. (But that means four in five are planning to keep their properties or even expand.)
Rising mortgage rates are likely to deter many buyers from buying. And may mean more owners feel pressed to sell.
It’s important to bear in mind that the fixed rate mortgage deals that have been popular in recent years are moderating the effect of this however. Some mortgage holders may even be lucky enough to find that mortgage rates start coming down again before their current fixed deal ends.
Repossessions tend to rise in periods of recession. Many people believe that repossessed properties are sold off at distressed prices and so offer bargains.
This report quoting UK Finance says that repossessions of owner-occupied properties rose 15% in the last quarter.(But read a little deeper and you will find that 15% only equated to about 90 properties – very small in relation to the market as a whole.)
Also lenders have exercised more forbearance in recent years than has traditionally been the case – and indeed are required to by law. So bargain hunters probably can’t rely on this as a source of property bargains.
One last factor that is very difficult to judge. And that is how Government policy might impact the housing market over the next few years. As this seems to change so often that’s really anyone’s guess.
So then, will there be bargains in the housing market next year?
In this recent article we took in some opinions from experts in the property market.
An average of their forecasts suggests house prices across the board could fall by just under 10% next year. It’s important to remember that means there could be a bigger fall in some markets/for some types of property and a smaller one in others.
At the end of the day, while this sort of price fall could represent an opportunity for some buyers next year, it doesn’t really suggest that there will be many bargains about.