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House Prices in 2023…what is happening?

House prices in 2023…

 

2% drop? 15% drop? What’s happening?

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There has been a lot of news in the past weeks about the state of the housing market in the UK. The consensus is that residential house prices will contract throughout the year, the one conflicting metric is, by how much?

There are a number of factors which will ultimately feed in to what becomes the answer to that question, but the answer today is that no one actually knows.

The key factor which drives the housing market, like most other markets, is supply and demand. If demand is greater than the supply, the price goes up. If however there is more supply than there is buyers for that supply, prices drop as competition among sellers is increased.

What will drive that demand is 2023 (and possibly 2024) is affordability.

Inflation, interest rates, and mortgage costs will fuel the affordability question for potential buyers. Labour, material costs, and development financing will largely drive it for house builders.

With more and more large home builders scaling back housing production due to insecurities around market conditions, they are reducing their exposure to the market, but they are also reducing the available supply. In normal conditions, this reduction in supply should actually result in an increase in prices, but with the affordability problems impacting potential buyers, the ‘demand’ is not there, and if some equilibrium can be found between the two, there could hopefully be some stabilisation in house pricing throughout the year.

The other impact of reducing house prices is that some properties which have been financially out of reach for some buyers, could become more affordable and therefore drive some volume in certain market segments. The counter to that is that, even with some lenders cutting mortgage rates, they are dropping them from an elevated position [in the instance of one lender, dropping from 6.6% to 4.5%] which means the financing is still expensive.

You may be reading this thinking, ‘what does that all mean?’, and that’s the point – we don’t know and neither do the people making predictions. It is a volatile time in the market, and there are numerous fluid elements that will continue to impact the general market, and the housing market specifically and it will likely take several months for some clarity to start appearing in the market.

All of that said, house building continues in the UK, even if it is at a reduced level. Compariqo is continuing to work with its customers in finding workable solutions to their construction insurance and finance requirements.

Get in touch with us today to discuss how we can support your business in these volatile times.

Compariqo offers bespoke re-financing and insurance solutions to the property sector. Contact one of our advisors today.

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