The housing market can be unpredictable. It seems to be in a near constant state of flux and the list of possible influencing factors is a long one. Trying to predict where it will go next is a difficult task to say the least. However, by looking at recent developments and comparing them to the housing market’s longer history, it may be possible to estimate the most likely progression.

What happened in 2021 and 2022?

For more than a decade now, house prices have been on the rise. In 2021, the increase was 10.2%, unaffordable to many. It certainly far outstripped growth in income. If prospective homebuyers cannot raise a deposit, it means they cannot step onto the housing ladder. That would explain a decrease in home ownership and increase in renting.

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There were specific changes in 2021. Stamp duty rates were lowered and outright suspended for lower-value properties. In December 2021 interest rates were increased for the first time in three years by the Bank of England, leading to higher mortgages. Both of these changes extended into 2022.

Despite the increasing prices and difficulties in raising a deposit, overall property transactions were high in 2021, but 2022 saw them at their lowest levels since the pandemic began. There was a reduction in people making inquiries about buying and selling houses. The ongoing impact of the pandemic, combined with rising inflation and economic uncertainty, clearly had an impact on the market, and attitudes.

What does this mean for 2023?

It seems likely that difficult economic conditions will continue into 2023, and the housing market will respond accordingly. In particular, prices are likely to fall as inflation continues to rise. If people are struggling to make larger mortgage repayments, that could lead to an increase in repossessions. Whilst obviously traumatic for the residents involved, this does mean more housing stock will be entering the market for sale.

Limited availability of housing is one of the things that has driven price increases. Some predictions suggest that next year’s fall in prices could be as much as 10%. Mortgage rates are currently at their highest level since 2008’s financial crash. This is alongside wider issues with the cost of living, such as the increase in energy prices, all of which makes house buying less affordable for many, and the ongoing recalibration caused by September’s mini-budget.

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Some people may experience benefits from the changing market, such as landlords who can charge higher rents. This will make it easier for them to re-mortgage if necessary. Buy-to-let mortgage holders, however, are likely to suffer because of increasing interest rates. When finances are so tight, moves such as a declaration of no interest in property become more commonplace. A declaration of no interest in property means you can make clear that regardless of your name or financial contributions, you do not have a beneficial interest in a property, perhaps because you are staying there temporarily, or a divorce settlement is imminent.

Accurate predictions about the housing market are particularly difficult at a time when the economy, in general, is experiencing a great deal of turmoil and a wider cost of living crisis hitting hard. With inflation, interest rates and mortgage rates rising, however, it seems a slowdown in the market may be occurring.

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