In the aftermath of the crypto boom, more people have wanted to get involved with investment.
However – despite the rising popularity of play-to-earn – it is important to remember that investment is not a game.
Property investment is no different, and those looking to get started must take their time to wrap their heads around the venture’s intricacies.
Investing in property is typically seen as one of the safest ways of investing your money, offering solid returns over a period of time in a stable market.
Buy-to-Let properties are the most common purchases, as they allow an investor to collect a steady rental income each month whilst also benefiting from capital appreciation in the long run.
With 2022 proving to be an exciting time for property, particularly in terms of price and rent growth, investors may be curious to see what’s on the horizon.
What does 2023 have in store for the property market?
Well, the following article will attempt to break down some of the property market predictions of the coming and what it will mean for investors.
So, whether you’re looking into the latest investment opportunity, the best investment properties for sale, or just dipping your toes into the market – read on to see the 2023 property forecast!
The North West Remains an Investment Hotspot
Throughout 2022, one region reigned supreme in terms of property investment – the North West.
Manchester and Liverpool flourished last year, with soaring population numbers leading to higher rental yields and affordable property prices.
One of the largest cities in the UK, Manchester’s property prices rose by 13.6% from October 2021 to October 2022 – way above the national average for the same period.
A similar instance of strong growth was also seen in Liverpool.
House prices in the maritime city rose to almost £180,000 in 2022, an impressive and highly affordable growth compared to most other major UK cities.
Looking at the rising population of both cities – in part due to their vast student presence – as well as the ongoing regeneration and increasing opportunities for young professionals on offer, it’s not hard to see why many investors chose the North West in 2022.
Whilst some experts have speculated a dip in the housing market over the coming months, the North West (and these cities, in particular) is expected to remain resilient throughout.
According to the latest forecast from Savills, the North West is predicted to see a 5-year growth of 11.7%, the highest level of growth of any region in the UK.
Manchester is also expected to be one of the few cities in the UK to see positive growth in 2023, with forecasts suggesting that sales price will rise by 1.5% over the next 12 months – one of the highest levels of growth predicted in the UK overall.
House Price Growth Will Temporarily Slow, But Future Growth is Still Expected
2022 brought huge levels of capital appreciation, with house prices soaring throughout the year.
The latest from the House Price Index puts the average house price in the UK at £296,000.
Compare that to the average at the same time last year, £275,000, and you can see just how sizable the growth has been.
As mentioned, some areas of the UK saw even higher levels of growth, but according to the latest market predictions, it is unlikely that this prosperity will last.
The leading cause behind the rapid growth experienced last year was the aftermath of the COVID-19 pandemic and the high demand for property, combined with the low levels of supply that followed.
Now two years post-pandemic, the economy has mostly recovered from the virus and its effects.
There is undoubtedly still a massive demand for housing, but the rapid rise of house prices combined with the cost of the living crisis currently ongoing in the UK has made housing unaffordable to many at the current rate of inflation.
It is, therefore, unlikely that house prices will continue to grow at the rates experienced in 2022 – leading to a slight drop in 2023.
The latest report by Savills states that house prices could fall by as high as 10%, but this is not necessarily a major cause for alarm.
Many experts suggest thinking of this data as a ‘reset button’ for the housing market after the chaos of 2022 – in which housing will become more affordable for many.
In fact, the report also predicts that house prices will rise overall by 6.2% by 2027. If you see house prices fall in 2023, it is not necessarily a permanent shift in the market.
For many investors, 2023 could present an ideal opportunity to invest in UK property while prices are low – but are set to increase further along the line.
At the height of the pandemic, UK house prices faced a temporary slump, with average prices falling by 0.6% between March and April.
By the end of the year, the average property prices had skyrocketed to record levels – and continued to do so, ensuring strong capital growth returns for investors.
Mortgages Rates will Calm Slightly – But Not Enough
The last few months of 2022 saw mortgage rates rise exponentially as an effort to combat growing inflation.
In October, these rates reached a 14-year high, and even after calming the following month slightly, some fixed-rate mortgages were reportedly at 5-6%.
This is not exactly the greatest news for investors, with buy-to-let mortgages typically fetching higher interest rates than standard residential mortgages due to the increased risk.
It stands to reason that if the base levels of mortgage interest are on the rise, buy-to-let mortgages will become less affordable for many.
In 2023, mortgages are expected to calm slightly now that the UK’s economic and political situation is somewhat stable compared to last year.
Reports believe that mortgage rates will peak at 4.75% next year after the Bank of England continues to take further action to slow inflation.
It is believed, however, that we will not see a return to the lower rates seen throughout the pandemic and that this could cause a lack of confidence in the market that could ripple out and see further aftershocks.
Given these predictions, investors looking to get involved with property should seek out off-plan properties to get the most out of the market.
Investing in off-plan usually requires lower costs than purchasing traditional fully-built properties – making it a much more affordable strategy going forward.
Combine this cost with a flexible payment plan, and investors can avoid borrowing a buy-to-let mortgage for their investment property.
All this will save you money in the long run and allow for more significant returns on your investment.