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Affordability Better Than Estimated in the UK Property Market

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    UK Property Prices Fared Much Better in the Face of Higher Mortgage Costs

    While many people thought the UK property market would suffer due to higher mortgage rates, new research has shown that affordability was not as adversely affected as anticipated.

    Let’s look at the figures in more detail and see what this could mean for the buy-to-let property market moving forward.

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      Average Price Drop Only Slight in the UK Housing Market

      Property data company TwentyCi conducted a thorough study of the housing market in 2023. They found that prices only dropped between 1 and 2%, a much better outcome than the previously predicted 6% drop.

      While this is a far cry from the significant rise in property prices in 2022, the figures suggest that the 20% drop in property transactions was merely a return to pre-Covid levels. This still meant that there were 1 million sales in the UK in 2023.

      From a sales perspective, people who sold a property in 2023 achieved 96.6% of their asking price, less than 99.4% from the previous year.

      The biggest surprise from the research is that instructions were up by 2% year-on-year, averaging roughly 400,000 new instructions per quarter. According to TwentyCi, these figures resemble a “normal” year in the housing market. Find out more interesting facts and figures with the RWinvest tools such as our popular Stamp Duty Calculator.

      According to TwentyCi’s Alex Bannister:

      “A year ago, the consensus forecast suggested residential property prices in the UK would drop by 6% in 2023 amidst a shrinking economy and a view that property was substantially overvalued.

      “It appears most commentators overestimated the negative effects of higher mortgage rates on affordability, and while sellers reduced asking prices, this did little to reverse the pandemic-driven surge.”

      Find Out More: Dive into some of our helpful guides, including our articles on how to make money in real estate and how to build a property portfolio.

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      What Is the Average Asking Price in the UK Property Market?

      The TwentyCi report shows that the average asking price of homes in the market stands at £429,000. These prices represent a £7,000 rise compared to 2022. According to TwentyCi, the asking price reflects the available stock on the market.

      However, research from Shawbrook shows that many buy-to-let investors see city centre apartments as one of the more lucrative investment opportunities rather than buying a house to rent out, following an influx of workers heading back to the office after spending so much time working hybrid or remote.

      Luckily, buy-to-let investors can buy these types of sought-after properties for a fraction of the average UK asking price, particularly if they look at cities outside London. For instance, one of the up-and-coming areas in the UK is Liverpool. This North West city has a strong economy that attracts potential tenants to the city centre looking for accommodation close to job prospects. However, according to the HM Land Registry UK House Price Index, the average property investment price is just over £177,000.

      Speaking about UK property prices, TwentyCi chief executive Colin Bradshaw commented:

      “Many sellers have been overly optimistic about pricing, and it seems the tide is finally changing. Mortgage affordability and increased supply are forcing a shift in properties with overinflated pricing.

      “The housing market is holding up rather well despite everything being thrown at it. I am not saying all is rosy in the garden, but rather, given the circumstances, 2023 could have been a whole lot worse.

      “There is still a lot of uncertainty both in the housing market and the economy generally and yet there are some good signs that the market is both robust and, moreover, will stay that way in 2024.”

      Keep up to date with the latest rental market insights with our handy buy-to-let area guides, including:

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      Dale Barham

      Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.