In recent years the UK property market has faced unprecedented challenges and successes. Now, with a recession and cost of living crisis impacting the UK, there are many questions as to what the market will look like in 2023 and the years to follow.
Here, we share our predictions across the residential, commercial and rural areas of the sector…
Lindsay French is an Associate Valuer and believes that despite what is being said in much of the mainstream media, 2023 will be a great year for both buyers and sellers.
“Although I do predict a small dip in house prices of around 5 per cent, it is still a great time to sell and I believe there will be well over 1 million homes sold nationwide next year.
“I also would say that it is very much a seller’s market at the moment, which is a trend that is likely to continue throughout 2023. What this means is that sellers can be selective and ensure that they select the best offer, which does not always mean the highest. Sometimes factors such as having no chain or a high deposit to mortgage ratio can be equally as favourable.
“For buyers, there has been a huge focus on rising interest rates and how this may act as a deterrent, however you must compare this to a time prior to 2020. The pandemic created a set of extraordinary circumstances that led to extremely low interest rates; but this is the exception and not the rule.”
Lettings Manager, Lorna White, highlights several upcoming trends and changes within the sector that are likely to impact upon both renters and landlords, with rent increases at the forefront heading into the New Year.
“Due to rising interest rates and a general increase in the overall cost of living, many landlords will find themselves forced to increase the rental price of their properties. While this will obviously impact new lettings, many landlords are also having to look at the rates for existing tenants too, who’s rental costs over time may have fallen below current market rates.”
Another key area of the lettings market that Lorna believes will see an increased focus in 2023 is a decrease in the volume of holiday lets.
“Due to an oversaturated market, non-competitive pricing and a nationwide shortage of rental properties, we are likely to see a decrease in the demand for holiday lets, that are often under-utilised and likely to be more profitable as longer-term residential rentals.”
An additional hot topic identified for the upcoming year is increased landlord liability and tougher regulations proposed for the grounds on which a tenant can be evicted.
“Introduced in October 2022, it became law that landlords must meet the mandatory requirement of fitting smoke and carbon monoxide alarms to their rented properties. If this is not adhered to, landlords can expect a £20,000 to £30,000 fine under HMO Management Regulation. There is also a bill in the works to abolish 'no-fault' evictions, meaning that once passed, landlords must provide grounds to warrant evicting their tenant. This is already the law in Scotland; however, the bill has not yet passed Parliament in England, meaning it is unclear exactly when it will come into action.”
On account of resource scarcity and rising prices across the board, Partner and agricultural and rural property specialist Tim Michie believes that cash flow demand and its relationship with input prices will continue to be a key factor across the rural property sector in 2023.
“As a result of export bans, continued fallout from COVID-19 and turbulent political events, the agricultural sector has seen a high volume of fluctuating costs which will likely continue well into next year.
“An opportunity for farmers to help lessen the burden in these challenging and unpredictable times, is to utilise and manage their natural assets in order to obtain an economic return. For farmers to really prosper, they also need to look at what their assets are beyond looking at machinery and natural assets like livestock and land and start thinking about themselves as assets.
“I also predict that there may be a reasonable amount of new land becoming available next year, so it is important that farmers are on the front foot and able to react most effectively and capitalise upon opportunities and new land that is available.”
Elliot Taylor, Partner and Farm Business consultant discusses the conundrum that is carbon credits, which is expected to play a pivotal role in the race to net zero. Carbon credits are measurable, verifiable emission reductions from certified climate action projects that reduce, remove, or avoid greenhouse gas emissions. These credits can be sold to businesses who can then use such credits to offset the carbon they emit.
Elliot said “While selling carbon offsets can be a great income stream for farmers and something I predict will continue to gain traction in 2023, farmers must remember to think of the bigger picture.
“If you sell all of your carbon credits you can’t claim them against your own emissions. This is important because if you are selling your products on to another party, they will want to know about your carbon emissions and once you’ve given away all your credits it also makes it harder to secure a good price”.
Richard Garland, Partner and Head of Development and Commercial at George F. White also offered his expertise as to what we are likely to see in 2023.
“The future is both concerning and exciting. Behind the tabloid headlines lies a much more nuanced picture of the economy. Whilst a recession is upon us, we are seeing continued economic investment by those taking a longer-term view.
“History tells us that there is always an opportunity and those with good financial standing and a longer-term investment view, will do the best in the long term.”
In addition to this Richard also looked at the upcoming industry changes that pose a threat to current client activity.
“Rising interest rates affect the comparative value of investment properties. Investment property yields at 5-6% are now being compared to ‘no risk’ interest rates of 3.5% which puts a different perspective on property investment.
“On top of that, changing EPC regulations mean that low grade and inefficient stock is now being valued on the basis of required improvements needed to maintain its investment value.”