Published: 28/12/2022
As we start a new year with a fresh outlook as to what to expect from house prices in 2023, it's fair to say that it will be a far cry from what we've experienced in the last 24 months, however, as will become clear in the below article, this may be a huge positive that will make the majority of movers far better off...
Firstly, a look back at 2022. War in Eastern Europe, costs of living on the rise, mortgage rates increasing to combat high levels of inflation and a general lack of confidence in the economy, all contributed to house prices coming down. If you look at the full 12 month period of 2022, prices in Lincolnshire only started to dip at the end of August (-0.14%), leading to a total monthly decrease by the end of Q3 of -0.39%. October they came down -1.4%, November -2.3% and December -2.9%. A total decrease on the last quarter of the year of -6.99%. Given that prices went up by a similar amount in Q1, Q2 and Q3 as a whole in 2022, the net difference was that homeowners were no better-off, nor worse-off.
Undoubtedly, the economic outlook is not going to drastically change in 2023. The Bank of England is expected to continue to raise the Base Rate, therefore causing mortgage rates to increase. The Base Rate at the end of 2022 was 3.5%. This could increase to over 5% by the end of 2023. This will make the costs of owning a mortgaged home far more expensive than say 12 months prior.
However, this isn't such a bad thing. While it may seem doom and gloom, the good news is that 80% of buyers will actually be better off. Here's why...
80% of home-movers sell their homes in order to up-size. This usually means buying a higher value property than what they're selling. If prices come down 12%, buyers will make a bigger saving on their purchase, compared to the financial hit they'll receive on their sale. Take these two scenarios, each assume at the beginning of the year the house you're selling is worth £250,000 and the house you're buying is worth £450,000.
2021 - House Prices in Lincolnshire increased 12%
House value (selling) January '21: £250,000
House value (buying) January '21: £450,000
Difference: £200,000
House value (selling) December '21: £280,000
House value (buying) December '21: £504,000
Difference: £224,000
When prices went up in 2021, buyers were worse-off when considering the extra money needed to spend/finance after selling their home. Compare this to 2023:
2023 - House prices in Lincolnshire decrease 12%
House value (selling) January '23: £250,000
House value (buying) January '23: £450,000
Difference: £200,000
House value (selling) December '23: £220,000
House value (buying) December '23: £396,000
Difference: £176,000