UK Property Market Roundup and Q3 and Q4 Predictions

Over the first six months of 2023, the UK property market has seen some major changes in terms of house price growth, rental growth and the tendencies of both buyers and sellers.

We’ll split this roundup into two parts, covering Q1 and Q2 separately before we make our UK property market predictions for 2023 and beyond.

This way, we can study what trends have emerged in the first half of the year and use them to make accurate 2023 property market predictions. If you are considering buying an investment property in 2023, then property marketing reports like this are very useful.

The next three months of 2023 saw the trend of falling house prices continue, while there was added pressure caused by rising mortgage interest rates, which even affected the rental market.

From April to June, annual house price growth once again fell slowly but steadily with no sign of growth due to the cost of living crisis and other outside factors limiting how much people could afford to spend on properties.

Annual house price growth fell from 3.5% in April to 1.7% in June, showing how the housing market was cooling off in real terms.

However, house price growth bounced back slightly from Q1 of 2023, with a national average growth of £2,536 across the country from April to June. This shows that although the market was cooling, demand for housing was still high, and the market once again proved its stability in the face of uncertainty.

Regionally, we saw a different picture for several cities in the UK. London was hit especially hard thanks to it having far higher property prices than the rest of the UK, which caused house prices to drop on both an annual growth rate and a month-by-month level.

London had the lowest annual growth in the country by far, with prices actually falling annually by 0.6%, the only area of the UK to see this happen.

On the other hand, the North East saw the highest annual growth of any English region, with an average of 4.7%.

House Prices Will Continue to Fall

One major trend during the first half of 2023 was that house prices were steadily falling at a slow but steady rate.

We believe this will continue in Q3 and Q4 of the year, as the market is not yet in a healthy enough position to warrant a return to rising house prices.

However, this is not a 2023 property market prediction of doom and gloom, but instead, a frank forecast that the housing market will hit an all-time peak in 2022 and will need to gradually calm down to avoid falling off a cliff.

If house prices slowly fall, this will allow the market to reset and stabilise while allowing potential homebuyers to afford to buy properties once again.

It isn’t likely that we’ll see house prices begin to grow by any meaningful amount in Q3 or Q4 of 2023, and in fact, many industry experts believe that they will continue to fall.

Savills’ forecast indicates that house prices can fall by as much as 10% across the UK by the end of the year, with some areas being affected less than others. The North West, in particular, is expected to outperform other areas of the UK, with even the worst predictions estimating prices will only fall by 8.5% in 2023. Why not learn where to invest money to get a monthly income in the UK by reading more about your investment options.

This means that cities like Liverpool and Manchester will be ideal for property investors. Not only do they already have affordable house prices far below the national average, but they will not be hit as hard by falling house prices, which is good news for those investing in capital appreciation.

To find out more about Liverpool property investment, read our free guide on buy-to-let in Liverpool.

When the Bank of England began raising the base rate of interest for the UK, mortgage rates quickly became unaffordable to many.

This was part of the reason why the property market has slowed down, as thousands are choosing to save or rent over borrowing a mortgage while they wait for interest rates to drop.

The good news is that there are already signs that this is happening, and by Q4, we expect that there will be some sense of normalcy returning to mortgage interest rates – even if it is not fully back to normal.

Nationwide has already lowered its mortgage interest rates, with the Financial Times predicting that this will lead to a ‘mini-rate war’ as mortgage brokers race to lower their rates enough to entice homebuyers back to the market.

With inflation beginning to fall, the Bank of England will likely begin to lower interest rates back down to lower levels, and mortgage brokers will be more than happy to follow to ensure they can start winning back more customers.

The Rental Market Will Reach a Peak

The rental market has had unparalleled growth in the first half of 2023, with rents continuing to rise thanks to high demand and a lack of supply.

The current wariness about buying property has benefited landlords immensely as it has led to a rise in those wanting to rent rather than buy. This is why learning how to build a property portfolio is highly recommended to make sure you make the right choices.

However, rents have been growing faster than income for months and months, and this outpacing can only go so far before the rental market also risks becoming unaffordable. This will see demand drop off and a sudden increase in landlords losing money because tenants are not living in their properties.

To avoid this, it is likely that we will see rental growth begin to slow down in Q3 and Q4 of 2023 to allow income growth to catch up.