What’s Happening in the UK Property Market in October?

For the past several months, house prices in the UK have slowly but steadily fallen. This has been one of the biggest property market news headlines the UK has seen in 2023, and it’s one that continues to draw attention.

The latest data from the UK House Price Index indicates that since September last year, when house prices hit an all-time peak, the national average house price has fallen by £7000.

The BBC reported that Nationwide saw the sharpest annual house price fall in 14 years in July, with the building society claiming that prices dropped by 3.8% from the year before.

There are several reasons for this, with one of the main ones being that housing was becoming unaffordable for many due to the cost of living crisis the UK is currently facing.

As well as this, the after-effects of the COVID-19 pandemic saw the housing market become hyper-active with the rise of remote working and people wanting to move after being stuck in lockdown.

Wales, Scotland and Northern Ireland all also benefited from this growth, although England saw the highest figures when it came to house prices thanks to major cities like London and Manchester. Why not read more about the type of investment property for sale in the UK at the moment with our property investment guide.

It was only natural for this to reach a peak and begin to fall.

Because of this, transactions began to fall from their peak, and with this, house prices soon followed.

While prices have fallen from their peak, high mortgage interest rates deter many from buying property, which means that affordability is still low. While this is another major UK property market news story we’ll cover later on, it’s one that is affecting house prices.

While this may seem alarming on paper, it is no real cause for worry.

House prices falling for a few months is actually a sign of a healthy market, and it is acting as a reset button which will help encourage buyers to begin getting back onto the property ladder.

For first-time buyers especially, falling property prices are a good thing, as it will mean they can afford to take their first step onto the ladder far more easily.

However, until mortgage rates begin to calm down, it is unlikely for prices to begin to rise again. The UK housing market benefits from slower fluctuation in prices, which helps it to avoid crashes, but it also means recovery can be sluggish. It is still viable to invest in real estate; however, a buy-to-let investment may be the safer option.

Industry experts from the Office for Budget Responsibility believe that house prices will drop by 10% over the next two years, while property experts Savills indicate this could be a fall of 11%. The Guardian has reported that building society Halifax is predicting a ‘gradual decline’. Estate agents across the country have similar expectations for the foreseeable future.

Despite this gloomy prediction, it is widely forecast that the housing market will bounce back from this slump and that house price growth will begin to rise once again after they become more affordable for the general public.

For property investors, this property market news story will likely affect them in two main ways.

Given that house prices are still unaffordable for first-time buyers, it is expected that there will be high demand for rental properties for the foreseeable future, as potential home buyers choose to avoid the sky-high mortgage interest rates and asking prices and look to rent for a more affordable alternative.

This means that buy-to-let investors could see a smaller chance of void periods for their investment properties, as well as a rise in their rental income, as the high demand leads to a rise in rents.

The second possible effect is that buy-to-let investors would be wise not to sell their investment properties until prices rise again.

Given that investors make a profit on the sale of their properties through capital appreciation, selling an investment property whilst house prices are falling is likely to have a detrimental effect on the returns they see from the sale.

By holding onto any investment properties they are looking to sell and waiting for prices to rise, investors are able to secure a higher profit from the sale than if they were to sell now while prices are lower.

It also means that buying an investment property is currently more affordable than it has been in the past, as market values continue to drop. So if you’ve had your eye on an investment property for a while, it might be worth checking the price.

As a result of falling house prices and rising mortgage rates, rents have reached a record high, according to the Financial Times.

Figures published by the Office for National Statistics report that private rental payments made by tenants have gone up by 5.1% since June last year, the largest recorded growth since they began recording the data in 2016.

This data shows that even with cautious projections for aspects such as house prices, the rental market is still thriving in the current climate.

The bounceback that the UK housing market experienced post-pandemic is partly responsible, while the rising mortgage rates, which have made buying unaffordable for first-time buyers, are also helping to fuel demand. If you are thinking of buying rental property in 2023, it is a good time to invest.

This is great for property investors as it means more returns from rental income. This regular cash flow increase can help with mortgage costs and compensate for the downturn in capital appreciation that falling house prices cause.

It is a direct result of the previous two UK housing market news stories mentioned above, as the year-on-year growth that house prices have seen has priced many would-be homebuyers out of the market, and a slow house building supply has created an imbalance of supply and demand.

Because of this, landlords have thrived in this market as they are able to charge higher rents to tenants who are not able to find quality rental properties in major cities. Whether you are an American buying property in the UK or if you are buying property in the UK as a foreigner, everyone is welcome.

Finding high-quality investment properties is an ideal way for investors to make the most of this, as these will see high demand from young professionals who can afford higher levels of rent, bringing investors more month-on-month returns.

This is one UK property market news headline that is undoubtedly good news for investors. Why not read about some of the best ways to invest £100,000 with our handy guide.